Working Papers
Abstract: Governments worldwide allocate substantial budgets to transportation projects to transform economies. This paper uses town-level data to identify the impact of the Erie Canal on sectoral transition, urbanization, and banking during the early economic modernization. Difference-in-differences and instrumental variable approaches show that the canal centralized economic activity in nearby towns. First, canal towns shifted from agriculture to manufacturing and commerce, with larger mills and more commercial activities. Second, the canal promoted long-term population growth and new town formation along its route. Third, it encouraged bank entry and increased bank size. Its influence on employment and population was spatially limited.
Transportation Infrastructure and Voting Behavior: How Canals Shaped Politics in Antebellum New York
Abstract: Political choices made by voters and politicians are fundamental forces shaping governments, policies, and societies. This paper studies the factors that change regional voting patterns by utilizing market access shocks from the transportation infrastructure expansion in New York State during the canal period. Using difference-in-differences and instrumental variable approaches, I find that votes for anti-Jacksonians depend on proximity to canals. I argue two underlying mechanisms: 1) Transportation improvement transforms the workforce and economy, as the rising manufacturing and commercial workers in canal towns become ideologically and economically aligned with anti-Jacksonians; 2) Social movements reinforce the voting pattern through information dissemination by newspapers.
The Value of Banking Relationships: Some Historical Evidence (with Howard Bodenhorn)
Abstract: Commercial banking is an industry in which long-term, nonexclusive relationships between bankers and their borrowers are governed by short-term contracts. This paper documents the nature of bank-borrower relationships in a historical setting. We use a new dataset of 55,000 loans to 10,000 unique borrowers over 35 years in the mid-nineteenth century. Two-way fixed effects models reveal that a one standard deviation increase in the number of previous loans leads to an increase in loan size by 4.72%. A one-year increase in the duration of a relationship leads to an increase in loan size of 5.6%. Relationships have small effects on loan rates, but substantial effects on collateral. Borrowers with relationships with competing banks receive substantially smaller loans. Propensity score matching reveals that banks learn about borrowers early in the relationship. Finally, the bank severed relationships with about half of the borrowers who defaulted on a loan. A surviving relationship becomes more valuable after default.