IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/10654.html
   My bibliography  Save this paper

Free Banking and Bank Entry in Nineteenth-Century New York

Author

Listed:
  • Howard Bodenhorn

Abstract

Previous studies of entry under New York's free banking law of 1838 have generated conflicting results. This article shows that different measures of entry lead to different conclusions about the competitive effects of the law. Measured by the entry of new banks, New York's free banking law led to increased rates of entry relative to other states. Free banking did not, however, lead to significant increases in capital accumulation in the industry. This paradoxical outcome resulted from the regulatory features of free banking, especially the bond security feature, which reduced profitability and incentives to invest in banking.

Suggested Citation

  • Howard Bodenhorn, 2004. "Free Banking and Bank Entry in Nineteenth-Century New York," NBER Working Papers 10654, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:10654
    Note: DAE ME
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w10654.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Charles W. Calomiris, 1989. "Deposit insurance: lessons from the record," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 13(May), pages 10-30.
    2. Sylla, Richard & Legler, John B. & Wallis, John J., 1987. "Banks and State Public Finance in the New Republic: The United States, 1790–1860," The Journal of Economic History, Cambridge University Press, vol. 47(2), pages 391-403, June.
    3. Sokoloff, Kenneth L., 1988. "Inventive Activity in Early Industrial America: Evidence From Patent Records, 1790–1846," The Journal of Economic History, Cambridge University Press, vol. 48(4), pages 813-850, December.
    4. Bodenhorn, Howard, 1990. "Entry, Rivalry and Free Banking in Antebellum America," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 682-686, November.
    5. Robert B. Litterman, 1982. "Optimal control of the money supply," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 6(Fall).
    6. Anna J. Schwartz, 1987. "The Beginning of Competitive Banking in Philadelphia, 1782–1809," NBER Chapters, in: Money in Historical Perspective, pages 3-23, National Bureau of Economic Research, Inc.
    7. Howard Bodenhorn, 1998. "Quis Custodiet Ipsos Custodes?," Eastern Economic Journal, Eastern Economic Association, vol. 24(1), pages 7-24, Winter.
    8. Bodenhorn, Howard, 1993. "The Business Cycle and Entry into Early American Banking," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 531-535, August.
    9. Howard Bodenhorn, 2006. "Bank Chartering and Political Corruption in Antebellum New York. Free Banking as Reform," NBER Chapters, in: Corruption and Reform: Lessons from America's Economic History, pages 231-257, National Bureau of Economic Research, Inc.
    10. Bodenhorn, Howard & Haupert, Michael, 1996. "The Note Issue Paradox in the Free Banking Era," The Journal of Economic History, Cambridge University Press, vol. 56(3), pages 687-693, September.
    11. Claudia Goldin & Gary D. Libecap, 1994. "Introduction to "The Regulated Economy: A Historical Approach to Political Economy"," NBER Chapters, in: The Regulated Economy: A Historical Approach to Political Economy, pages 1-12, National Bureau of Economic Research, Inc.
    12. Arthur J. Rolnick & Warren E. Weber, 1982. "Free banking, wildcat banking, and shinplasters," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 6(Fall).
    13. Bodenhorn, Howard & Haupert, Michael, 1995. "Was There a Note Issue Conundrum in the Free Banking Era?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 702-712, August.
    14. Bodenhorn, Howard, 1999. "An Engine of Growth: Real Bills and Schumpeterian Banking in Antebellum New York," Explorations in Economic History, Elsevier, vol. 36(3), pages 278-302, July.
    15. Bodenhorn, Howard, 1997. "Private Banking in Antebellum Virginia: Thomas Branch & Sons of Petersburg," Business History Review, Cambridge University Press, vol. 71(4), pages 513-542, January.
    16. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-332, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Alberto Basso & David Cuberes, 2013. "Fertility and Financial Development: Evidence from U.S. Counties in the 19th Century," Working Papers 2013011, The University of Sheffield, Department of Economics.
    2. Eric Hilt, 2016. "Corporation Law and the Shift toward Open Access in the Antebellum United States," NBER Chapters, in: Organizations, Civil Society, and the Roots of Development, pages 147-177, National Bureau of Economic Research, Inc.
    3. Hilt, Eric & Valentine, Jacqueline, 2012. "Democratic Dividends: Stockholding, Wealth, and Politics in New York, 1791–1826," The Journal of Economic History, Cambridge University Press, vol. 72(2), pages 332-363, May.
    4. Hilt, Eric, 2008. "When did Ownership Separate from Control? Corporate Governance in the Early Nineteenth Century," The Journal of Economic History, Cambridge University Press, vol. 68(3), pages 645-685, September.
    5. Howard Bodenhorn & David Cuberes, 2010. "Financial Development and City Growth: Evidence from Northeastern American Cities, 1790-1870," NBER Working Papers 15997, National Bureau of Economic Research, Inc.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Howard Bodenhorn, 2006. "Bank Chartering and Political Corruption in Antebellum New York. Free Banking as Reform," NBER Chapters, in: Corruption and Reform: Lessons from America's Economic History, pages 231-257, National Bureau of Economic Research, Inc.
    2. Stephen Haber, 2008. "Differential Paths of Financial Development: Evidence from New World Economies," NBER Chapters, in: Understanding Long-Run Economic Growth: Geography, Institutions, and the Knowledge Economy, pages 89-120, National Bureau of Economic Research, Inc.
    3. repec:dgr:uvatin:20130210 is not listed on IDEAS
    4. Stephen Haber & Enrico Perotti, 2008. "The Political Economy of Financial Systems," Tinbergen Institute Discussion Papers 08-045/2, Tinbergen Institute.
    5. Howard Bodenhorn, 2016. "Two Centuries of Finance and Growth in the United States, 1790-1980," Working Papers id:11352, eSocialSciences.
    6. Howard Bodenhorn & David Cuberes, 2010. "Financial development and city growth: Evidence from Northeastern American cities, 1790-1870," Working Papers 2010/35, Institut d'Economia de Barcelona (IEB).
    7. Howard Bodenhorn, 2017. "Opening Access: Banks and Politics in New York from the Revolution to the Civil War," NBER Working Papers 23560, National Bureau of Economic Research, Inc.
    8. Christopher Bailey & Tarique Hossain & Gary Pecquet, 2018. "Private banks in early Michigan, 1837–1884," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 12(1), pages 153-180, January.
    9. Howard Bodenhorn, 2009. "Splendid Associations of Favored Individuals: Federal and State Commercial Banking Policy in the Federalist Era," NBER Working Papers 15135, National Bureau of Economic Research, Inc.
    10. Howard Bodenhorn & Eugene N. White, 2014. "The Evolution of Bank Boards of Directors in New York, 1840–1950," NBER Chapters, in: Enterprising America: Businesses, Banks, and Credit Markets in Historical Perspective, pages 107-145, National Bureau of Economic Research, Inc.
    11. David Andolfatto, 2005. "On the Coexistence of Money and Bonds," 2005 Meeting Papers 9, Society for Economic Dynamics.
    12. Wallis, John & Weingast, Barry, 2005. "The Financing of 19th Century Internal Improvements," Department of Economics, Working Paper Series qt7nh1c6df, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    13. John Joseph Wallis, 2010. "The Other Foundings: Federalism and the Constitutional Structure of American Government," NBER Chapters, in: Founding Choices: American Economic Policy in the 1790s, pages 177-213, National Bureau of Economic Research, Inc.
    14. Charles Calomiris & Joseph R. Mason, 2003. "How to Restructure Failed Banking Systems: Lessons from the U.S. in the 1930's and Japan in the 1990's," NBER Working Papers 9624, National Bureau of Economic Research, Inc.
    15. Ignacio Briones & Hugh Rockoff, 2005. "Do Economists Reach a Conclusion on Free-Banking Episodes?," Econ Journal Watch, Econ Journal Watch, vol. 2(2), pages 279-324, August.
    16. John Joseph Wallis & Barry R. Weingast, 2005. "Equilibrium Impotence: Why the States and Not the American National Government Financed Economic Development in the Antebellum Era," NBER Working Papers 11397, National Bureau of Economic Research, Inc.
    17. Ching-Yi Chung & Gary Richardson, 2006. "Deposit Insurance and the Composition of Bank Suspensions in Developing Economies: Lessons from the State Deposit Insurance Experiments of the 1920S," NBER Working Papers 12594, National Bureau of Economic Research, Inc.
    18. 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.
    19. Qian Lu & John Joseph Wallis, 2015. "Banks, Politics, and Political Parties: From Partisan Banking to Open Access in Early Massachusetts," NBER Working Papers 21572, National Bureau of Economic Research, Inc.
    20. Charles W. Calomiris & Christopher Hanes, 1994. "Historical Macroeconomics and American Macroeconomic History," NBER Working Papers 4935, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913
    • N41 - Economic History - - Government, War, Law, International Relations, and Regulation - - - U.S.; Canada: Pre-1913

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:10654. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.