Working Paper: CEPR ID: DP12500
Authors: Sibylle Lehmannhasemeyer; Fabian Wahl
Abstract: We show that smaller, regional public financial intermediaries significantly contributed to industrial development, using a new data set of the foundation year and location of Prussian savings banks. This extends the banking-growth nexus beyond its traditional focus on the large universal banks, to savings banks. The saving banks had an impact through the financing of public infrastructure, such as railways, and new private factories. Saving banks were public financial intermediaries, so our results suggest that state intervention can be successful, particularly at early stages of industrial development when capital requirements are manageable, and access to international capital markets is limited.
Keywords: savings banks; prussia; industrialisation; public infrastructure; regional and urban development
JEL Codes: G21; N23; N74; N93; R11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Establishment of savings banks (G21) | Population growth (J11) |
| Savings banks (G21) | Urban development in smaller, remote cities (R11) |
| Savings banks financed public infrastructure projects (G21) | Regional industrialization (R11) |
| Savings banks provided credit to local industries (G21) | Increased economic activity (F69) |
| Savings banks (G21) | Essential funding for infrastructure and local businesses (H76) |