Access to Finance and Technological Innovation: Evidence from Antebellum America
75 Pages Posted: 22 Mar 2018 Last revised: 6 Apr 2021
Date Written: March 18, 2018
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: Suggested Citation