NBER Publications by Rodney Ramcharan

Economists have argued that a high concentration of land holdings in a country can create powerful interest groups that retard the creation of economic institutions, and thus hold back economic development. Could these arguments apply beyond underdeveloped countries with backward political institutions? We find that in the early 20th century, the distribution of land in the United States is correlated with the extent of banking development. Correcting for state effects, counties with very concentrated land holdings tend to have disproportionately fewer banks per capita in the 1920s. Banks were especially scarce both when landed elites' incentive to suppress finance, as well as their ability to exercise local influence, was higher, suggesting support for a political economy explanation. Cou...

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.