Access to Finance and Technological Innovation: Evidence from Antebellum America

66 Pages Posted: 22 Mar 2018 Last revised: 28 Dec 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 provides new evidence on how access to finance impacts technological innovation and establishes labor scarcity as a novel economic mechanism. We exploit antebellum America, a unique setting with (1) staggered passage of free banking laws across states and (2) well-documented differences in labor scarcity between free and slave states. We find that access to finance spurred technological innovation as measured by patenting activities, especially in free states where labor was relatively scarcer. Notably, in slave states, access to finance encouraged technological innovation that substituted for free labor but discouraged technological innovation that substituted for slave labor.

Keywords: access to finance, innovation, labor scarcity, labor cost, free banking laws

JEL Classification: G28, O31, 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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