Working Paper: NBER ID: w14347
Authors: Raghuram G. Rajan; Rodney Ramcharan
Abstract: Landed elites in the United States in the early decades of the twentieth century played a significant role in restricting the development of finance. States that had higher land concentration passed more restrictive banking legislation. At the county level, counties with very concentrated land holdings tended to have disproportionately fewer banks per capita. Banks were especially scarce both when landed elites' incentive to suppress finance, as well as their ability to exercise local influence, was higher. Finally, the resulting financial underdevelopment was negatively correlated with subsequent manufacturing growth. We draw lessons from this episode for understanding economic development.
Keywords: land concentration; financial development; banking structure; agricultural interests
JEL Codes: G20; O16; O43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| land concentration (Q24) | fewer banks per capita (G21) |
| land concentration (Q24) | influence on banking legislation (G28) |
| land concentration (Q24) | economic power of landowners (Q15) |
| tenancy levels (R21) | amplification of land concentration's impact on banking density (F65) |
| crop lien laws (Q15) | control over credit by landowners (Q15) |
| restrictive banking legislation (G28) | adverse effects on local economic growth (R11) |
| land concentration (Q24) | adverse effects on manufacturing sector (L52) |
| land concentration (Q24) | financial underdevelopment (O16) |
| land concentration (Q24) | banking density (G21) |