Labor Scarcity, Finance, and Innovation: Evidence from Antebellum America

74 Pages Posted: 22 Mar 2018 Last revised: 31 Oct 2018

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

This paper establishes labor scarcity as an important economic channel through which access to finance shapes technological innovation. We exploit antebellum America, a unique setting with (1) staggered passage of free banking laws across states and (2) sharp differences in labor scarcity between slave and free states. We find that greater access to finance spurred technological innovation as measured by patenting activities, especially in free states where labor was relatively scarcer. Interestingly, in slave states where slave labor was prevalent, access to finance encouraged technological innovation that substituted for free labor but discouraged technological innovation that substituted for slave labor.

Keywords: antebellum America, free banking laws, finance and innovation, labor scarcity

JEL Classification: G21, J20, N21, O31

Suggested Citation

Mao, Yifei and Wang, Jessie Jiaxu, Labor Scarcity, Finance, and 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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