Epidemic Disease and Financial Development
80 Pages Posted: 3 Apr 2018 Last revised: 6 Jan 2021
Date Written: August 5, 2020
We study the impact of an epidemic disease on modern financial development by exploiting geographic variations in the precolonial survival conditions of the TseTse fly, which transmits an epidemic disease that is harmful to humans and fatal to livestock in Africa. We find that firms and households in regions historically more exposed to the epidemic disease have less access to external financing today. Exploring the channels, we find that people in historically infested regions are less likely to trust others and financial institutions, to share credit information and to learn and adopt new financial technologies.
Keywords: Disease, External Finance, Financial development, Trust, Technology Adoption
JEL Classification: G21; O13; O16; O55
Suggested Citation: Suggested Citation