Access to Finance and Technological Innovation: Evidence from Pre-Civil War America

99 Pages Posted: 22 Mar 2018 Last revised: 31 May 2022

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; Board of Governors of the Federal Reserve System

Date Written: March 18, 2018

Abstract

This paper provides new evidence on how access to finance affects technological innovation and establishes the role of labor practices in shaping this relation. We exploit a unique setting—pre-Civil War America—where staggered adoption of free banking laws across states encouraged bank entry, and variation in the use of exploited workers in agriculture generated differences in producers' demands for labor-saving technologies. Results show that access to finance spurred innovation; the positive effect on agricultural innovation diminished with labor exploitation. We establish the causal role of labor exploitation using the 1850s cholera pandemic and the influx of Irish immigrants.

Keywords: finance-growth nexus, banking deregulation, innovation, 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 Pre-Civil War America (March 18, 2018). 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

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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