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Shattered Rails, Ruined Credit: Financial Fragility and Railroad Operations in the Great Depression

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  • SCHIFFMAN, DANIEL A.

Abstract

This article uses a new panel dataset to investigate the relationship between financial fragility and real activity on U.S. railroads during 1929–1940. Leverage had a negative effect on maintenance, within small firms only. Bankruptcy had a positive effect on maintenance and employment, within large firms only. Both leverage and bankruptcy effects were significantly larger during the worst depression years. Had all railroads been bankrupt during 1930–1933, GDP would have increased by 0.2 percent annually, and employment by 0.125 percent annually. Loans by the Reconstruction Finance Corporation had no impact on maintenance or employment.

Suggested Citation

  • Schiffman, Daniel A., 2003. "Shattered Rails, Ruined Credit: Financial Fragility and Railroad Operations in the Great Depression," The Journal of Economic History, Cambridge University Press, vol. 63(3), pages 802-825, September.
    • Handle: RePEc:cup:jechis:v:63:y:2003:i:03:p:802-825_54
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    Cited by:

    1. Barry Eichengreen, 2011. "Crisis and Growth in the Advanced Economies: What We Know, What We Do not, and What We Can Learn from the 1930s," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 53(3), pages 383-406, September.
    2. Butkiewicz, James, 2015. "Eugene Meyer And The German Influence On The Origin Of Us Federal Financial Rescues," Journal of the History of Economic Thought, Cambridge University Press, vol. 37(1), pages 57-77, March.
    3. Christopher A. Kennedy, 2023. "Biophysical economic interpretation of the Great Depression: A critical period of an energy transition," Journal of Industrial Ecology, Yale University, vol. 27(4), pages 1197-1211, August.
    4. John R. Graham & Sonali Hazarika & Krishnamoorthy Narasimhan, 2011. "Financial Distress in the Great Depression," NBER Working Papers 17388, National Bureau of Economic Research, Inc.
    5. Lyndon Moore & Gertjan Verdickt, 2022. "Railroad Bailouts in the Great Depression," Papers 2205.13025, arXiv.org, revised May 2023.
    6. John R. Graham & Sonali Hazarika & Krishnamoorthy Narasimhan, 2011. "Corporate Governance, Debt, and Investment Policy During the Great Depression," Management Science, INFORMS, vol. 57(12), pages 2083-2100, December.
    7. John R. Graham & Sonali Hazarika & Krishnamoorthy Narasimhan, 2011. "Corporate Governance, Debt, and Investment Policy during the Great Depression," NBER Working Papers 17387, National Bureau of Economic Research, Inc.
    8. Alexander J. Field, 2011. "The Adversity/Hysteresis Effect: Depression-Era Productivity Growth in the U.S. Railroad Sector," NBER Chapters, in: The Rate and Direction of Inventive Activity Revisited, pages 579-606, National Bureau of Economic Research, Inc.

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