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The Bankruptcy Express: Market Integration, Organizational Changes, and Financial distress in 19th century Britain

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  • Korn, Tobias
  • Lacroix, Jean

Abstract

This paper shows that amid aggregate gains, market integration generates within sector reallocation. To measure this effect, we collected new data on personal bankruptcies during the rail expansion in 19th century Britain. Our estimators leverage within geography-time and within sector-time variation to measure sector-specific effects of the rail on both employment and bankruptcies. A connection to railway increased bankruptcies only in the manufacturing sector, despite simultaneously increasing employment in that sector. Both a three-way fixed effects and a Least Cost Path approach validate the causality of our estimates. We further show that organizational changes that occurred in the manufacturing sector upon market integration explain our results: Firms expanded, self-employment decreased, occupations diversified; overall, the nature of labour changed. This biased growth of the manufacturing sector caused financial distress for some of its workers.

Suggested Citation

  • Korn, Tobias & Lacroix, Jean, 2024. "The Bankruptcy Express: Market Integration, Organizational Changes, and Financial distress in 19th century Britain," Hannover Economic Papers (HEP) dp-731, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    • Handle: RePEc:han:dpaper:dp-731
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    References listed on IDEAS

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    1. Carl Benedikt Frey & Thor Berger & Chinchih Chen, 2018. "Political machinery: did robots swing the 2016 US presidential election?," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 34(3), pages 418-442.
    2. Nicholas Crafts, 2022. "Slow real wage growth during the Industrial Revolution: productivity paradox or pro-rich growth? [Engels’ pause: technical change, capital accumulation, and inequality in the British industrial rev," Oxford Economic Papers, Oxford University Press, vol. 74(1), pages 1-13.
    3. Stephan Heblich & Stephen J. Redding & Yanos Zylberberg, 2024. "The Distributional Consequences of Trade: Evidence from the Grain Invasion," Working Papers 337, Princeton University, Department of Economics, Center for Economic Policy Studies..
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    More about this item

    Keywords

    Bankruptcies; Economic Growth; Structural transformation;
    All these keywords.

    JEL classification:

    • N63 - Economic History - - Manufacturing and Construction - - - Europe: Pre-1913
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law

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