Epidemic Disease and Financial Development

An, Jiafu; Hou, Wenxuan; Lin, Chen

doi:10.2139/ssrn.3152410

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Epidemic Disease and Financial Development

80 Pages Posted: 3 Apr 2018 Last revised: 6 Jan 2021

See all articles by Jiafu An

Wenxuan Hou

University of Edinburgh - Business School; University of Edinburgh - Business School; Shanghai Lixin University of Accounting and Finance

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Date Written: August 5, 2020

Abstract

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

An, Jiafu and Hou, Wenxuan and Hou, Wenxuan and Lin, Chen, Epidemic Disease and Financial Development (August 5, 2020). Available at SSRN: https://ssrn.com/abstract=3152410 or http://dx.doi.org/10.2139/ssrn.3152410