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

NBER Working Paper No. 20032

Issued in April 2014

NBER Program(s):Development of the American Economy



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 bank asset composition consistent with reductions in the incidence of moral hazard.

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Document Object Identifier (DOI): 10.3386/w20032

Published: Did Railroads Make Antebellum U.S. Banks More Sound?, Jeremy Atack, Matthew S. Jaremski, Peter L. Rousseau. in Enterprising America: Businesses, Banks, and Credit Markets in Historical Perspective, Collins and Margo. 2015

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