NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Did Railroads Make Antebellum U.S. Banks More Sound?

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


This chapter is a preliminary draft unless otherwise noted. It may not have been subjected to the formal review process of the NBER. This page will be updated as the chapter is revised.

Chapter in forthcoming NBER book Enterprising America: Businesses, Banks, and Credit Markets in Historical Perspective, William J. Collins and Robert A. Margo, editors
Conference held December 14, 2013
Forthcoming from University of Chicago Press

We investigate the relationships of bank failures and balance sheet conditions with measures of proximity to different forms of transportation in the United States over the period from 1830-1860. A series of hazard models and bank-level regressions indicate a systematic relationship between proximity to railroads (but not to other means of transportation) and “good” banking outcomes. Although railroads improved economic conditions along their routes, we offer evidence of another channel. Specifically, railroads facilitated better information flows about banks that led to modifications in the composition of bank assets consistent with reductions in the incidence of moral hazard. Railroads were positively correlated with bank stability and their presence nearby encouraged banks to hold safer portfolios that contained fewer bonds and banknotes and more loans.

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This paper was revised on August 25, 2014

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This chapter first appeared as NBER working paper w20032, Did Railroads Make Antebellum U.S. Banks More Sound?, Jeremy Atack, Matthew S. Jaremski, Peter L. Rousseau
 
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