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Enterprising AmericaBusinesses, Banks, and Credit Markets in Historical Perspective$
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William J. Collins and Robert A. Margo

Print publication date: 2015

Print ISBN-13: 9780226261621

Published to Chicago Scholarship Online: May 2016

DOI: 10.7208/chicago/9780226261768.001.0001

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Did Railroads Make Antebellum US Banks More Sound?

Did Railroads Make Antebellum US Banks More Sound?

(p.149) 4 Did Railroads Make Antebellum US Banks More Sound?
Enterprising America

Jeremy Atack

Matthew S. Jaremski

Peter L. Rousseau

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.

Keywords:   Antebellum banks, railroads, bank stability, bank portfolio risk, historical geographic information systems, GIS

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