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Landed Interests and Financial Underdevelopment in the United States

Author

Listed:
  • 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.

Suggested Citation

  • Raghuram G. Rajan & Rodney Ramcharan, 2008. "Landed Interests and Financial Underdevelopment in the United States," NBER Working Papers 14347, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:14347
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    References listed on IDEAS

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    Cited by:

    1. Vollrath, Dietrich, 2008. "Agrarian Structure and Endogenous Financial System Development," MPRA Paper 11538, University Library of Munich, Germany.
    2. Hauner, David & Prati, Alessandro & Bircan, Cagatay, 2013. "The interest group theory of financial development: Evidence from regulation," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 895-906.
    3. Madestam, Andreas, 2014. "Informal finance: A theory of moneylenders," Journal of Development Economics, Elsevier, vol. 107(C), pages 157-174.
    4. Cagatay Bircan & David Hauner & Alessandro Prati, 2012. "The interest group theory of financial development: evidence from regulation," Working Papers 150, European Bank for Reconstruction and Development, Office of the Chief Economist.
    5. Liu, Guanchun & Zhang, Chengsi & Zhu, Yueteng, 2020. "The interest group theory of banking sector expansion in China: Evidence from a quasi-natural experiment," Journal of International Money and Finance, Elsevier, vol. 107(C).
    6. James Feigenbaum & James Lee & Filippo Mezzanotti, 2022. "Capital Destruction and Economic Growth: The Effects of Sherman's March, 1850–1920," American Economic Journal: Applied Economics, American Economic Association, vol. 14(4), pages 301-342, October.
    7. Vollrath, Dietrich, 2008. "Agrarian Structure and Endogenous Financial System Development," MPRA Paper 11538, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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