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American Banking and the Transportation Revolution before the Civil War

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  • Atack, Jeremy
  • Jaremski, Matthew
  • Rousseau, Peter L.

Abstract

Studies have shown a connection between finance and growth, but most do not consider how financial and real factors interact to put a virtuous cycle of economic development into motion. As the main transportation advance of the nineteenth century, railroads connected established commercial centers and made unsettled areas along their routes better candidates for development. We measure the strength of links between railroads and banks in seven Midwest states using an annual transportation geographic information system (GIS) database linked to a census of banking. These data indicate that those counties that already had a bank were more likely to see their first railroad go through over the next decade, while new banks tended to enter a county a year or two after a railroad was built. The initial banking system thus helped establish the rail system, while the rapid expansion of railroads helped fill in the banking map of the American Midwest.

Suggested Citation

  • Atack, Jeremy & Jaremski, Matthew & Rousseau, Peter L., 2014. "American Banking and the Transportation Revolution before the Civil War," The Journal of Economic History, Cambridge University Press, vol. 74(4), pages 943-986, December.
    • Handle: RePEc:cup:jechis:v:74:y:2014:i:04:p:943-986_00
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    Citations

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    Cited by:

    1. Rui Manuel Pereira, Alfredo Marvao Pereira and William J. Hausman, 2017. "Railroad Infrastructure Investments and Economic Development in the Antebellum United States," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 42(3), pages 1-16, September.
    2. Chaudhary, Latika & Fenske, James, 2020. "Did railways affect literacy? Evidence from India," The Warwick Economics Research Paper Series (TWERPS) 1320, University of Warwick, Department of Economics.
    3. Howard Bodenhorn, 2016. "Two Centuries of Finance and Growth in the United States, 1790-1980," Working Papers id:11352, eSocialSciences.
    4. Hanlon, W.Walker & Heblich, Stephan, 2022. "History and urban economics," Regional Science and Urban Economics, Elsevier, vol. 94(C).
    5. Chan, Jeff, 2022. "Farming output, concentration, and market access: Evidence from the 19th-century American railroad expansion," Journal of Development Economics, Elsevier, vol. 157(C).
    6. Lehmann-Hasemeyer, Sibylle & Wahl, Fabian, 2017. "Savings Banks and the Industrial Revolution in Prussia Supporting Regional Development with Public Financial Institutions," CEPR Discussion Papers 12500, C.E.P.R. Discussion Papers.
    7. Lin, Chen & Ma, Chicheng & Sun, Yuchen & Xu, Yuchen, 2021. "The telegraph and modern banking development, 1881–1936," Journal of Financial Economics, Elsevier, vol. 141(2), pages 730-749.
    8. Jeremy Atack & Matthew S. Jaremski & Peter L. Rousseau, 2014. "Did Railroads Make Antebellum U.S. Banks More Sound?," NBER Chapters, in: Enterprising America: Businesses, Banks, and Credit Markets in Historical Perspective, pages 149-178, National Bureau of Economic Research, Inc.
    9. Bodenhorn, Howard & Cuberes, David, 2018. "Finance and urbanization in early nineteenth-century New York," Journal of Urban Economics, Elsevier, vol. 104(C), pages 47-58.

    More about this item

    JEL classification:

    • N11 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: Pre-1913
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
    • N71 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: Pre-1913
    • N91 - Economic History - - Regional and Urban History - - - U.S.; Canada: Pre-1913

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