Access to Finance and Technological Innovation: Evidence from Antebellum America

75 Pages Posted: 22 Mar 2018 Last revised: 6 Apr 2021

See all articles by Yifei Mao

Yifei Mao

Cornell University - SC Johnson College of Business - Finance Department

Jessie Jiaxu Wang

Arizona State University (ASU) - W.P. Carey School of Business

Date Written: March 18, 2018

Abstract

How does access to finance affect technological innovation? We provide causal evidence on the finance-innovation nexus and on the role of labor practices in shaping this relation. We exploit a unique setting—antebellum America—where staggered adoption of free banking laws across states encouraged bank entry, and spatial variation in the use of exploited workers in agriculture generated differences in producers' demand for labor-saving technologies. Results show that access to finance spurred innovation, but the positive effect on agricultural innovation diminished with labor exploitation. Where exploitative labor practices were pervasive, finance aggravated exploitation and appears to have impeded agricultural innovation.

Keywords: finance-growth nexus, banking deregulation, technological innovation, exploitative labor practices

JEL Classification: G21, G28, O31, O16, N21

Suggested Citation

Mao, Yifei and Wang, Jessie Jiaxu, Access to Finance and Technological Innovation: Evidence from Antebellum America (March 18, 2018). Kelley School of Business Research Paper No. 18-21, Available at SSRN: https://ssrn.com/abstract=3143199 or http://dx.doi.org/10.2139/ssrn.3143199

Yifei Mao

Cornell University - SC Johnson College of Business - Finance Department ( email )

Ithaca, NY 14850
United States

Jessie Jiaxu Wang (Contact Author)

Arizona State University (ASU) - W.P. Carey School of Business ( email )

Tempe, AZ 85287-3706
United States

HOME PAGE: http://www.jiaxuwang.com

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