TY  - JOUR
AU  - Dehejia,Rajeev
AU  - Lleras-Muney,Adriana
TI  - Why Does Financial Development Matter? The United States from 1900 to 1940
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9551
PY  - 2003
Y2  - March 2003
UR  - http://www.nber.org/papers/w9551
L1  - http://www.nber.org/papers/w9551.pdf
N1  - Author contact info:
Rajeev H. Dehejia
Wagner School of Public Policy
New York University
295 Lafayette Street, 2nd floor
New York, NY 10012
Tel: 212-998-7435
E-Mail: rajeev@dehejia.net

Adriana Lleras-Muney
Department of Economics
9373 Bunche Hall
UCLA
Los Angeles, CA 90095
Tel: 310/825-3925
Fax: NA
E-Mail: alleras@ECON.UCLA.EDU
AB  - There is a substantial literature arguing that financial development contributes to economic growth. In this paper, we contribute to this literature by examining the effect of state-level banking regulation on financial development and economic growth in the United States from 1900 to 1940. Specifically, we make three contributions. First, drawing on the banking history literature, we carefully control for factors that could confound a causal interpretation of the effect of financial development on growth. Second, drawing on available data for this period, we examine the pathways through which financial development can affect growth; in particular, we examine the impact of these laws on a range of farm, manufacturing, and human capital outcomes. Third, we document that not all forms of financial development have a positive effect on economic growth. In particular indiscriminate lending can negatively impact economic growth.
ER  -