REFERENCES

Boggart, Ernest Ludlow. “Farm Ownership in the United States.” Journal of Political Economy 16, no. 4 (1908): 201–11.

Bordo, Michael D., Claudia, Goldin, and White, Eugene N., eds. The Defining Moment: The Great Depression and the American Economy in the Twentieth Century. Chicago: University of Chicago Press, 2007.

Calomiris, Charles W. “Financial factors in the Great Depression.” Journal of Economic Perspectives 7, no. 2 (1993): 61–85.

Calomiris, Charles W., and Mason, Joseph R.. “Consequences of Bank Distress during the Great Depression.” American Economic Review 93, no. 3 (2003): 937–47.

Carlson, Mark, and Kris, James Mitchener. “Branch Banking as a Device for Discipline: Competition and Bank Survivorship during the Great Depression.” Journal of Political Economy 117, no. 2 (2009): 165–210.

Collins, William J., and Katharine L. Shester. “Slum Clearance and Urban Renewal in the United States.” American Economic Journal: Applied Economics 5, no. 1 (2013): 239–73.

Hillier, Amy E. “Redlining and the Home Owners’ Loan Corporation.” Journal of Urban History 29, no. 4 (2003): 394–420.

Inman, Buis, and Fippin, William H.. Farm Land Ownership in the United States. No. 699. U.S. Dept. of Agriculture, Bureau of Agricultural Economics, 1949.

James, Marquis, and Bessie, Rowland James. Biography of a Bank, the Story of Bank of America. New York, NY: Harper and Brothers, 1954.

Key, Nigel. “Farm Size and Productivity Growth in the United States Corn Belt.” Food Policy 84 (2019): 186–95.

Khan, B. Zorina. Inventing Ideas: Patents, Prizes, and the Knowledge Economy. New York, NY: Oxford University Press, 2020.

Nevins, Allan. The Gateway to History. New York, NY: Routledge, 2018.

Rose, Jonathan D., and Snowden, Kenneth A.. “The New Deal and the Origins of the Modern American Real Estate Loan Contract.” Explorations in Economic History 50, no. 4 (2013): 548–66.

“LOANS FOR THE LITTLE FELLOW:” CREDIT, CRISIS, AND RECOVERY IN THE GREAT DEPRESSION

This chapter demonstrates that local credit availability changed labor market fundamentals during the banking crises of the early 1930s, leading to differences in both the size of the economic contraction and the extent of the recovery. First, I provide direct evidence that local credit market disruptions played a significant role in cities’ economic growth throughout the 1930s. Then, using linked census data, I establish a new set of stylized facts on the labor market effects of financial crises. Positive crisis credit supply shocks disproportionately shifted labor into nontradable industries and out of agriculture. Recent analysis has examined the ways in which the manufacturing and agricultural sectors amplified the negative effects of banking instability during the early 1930s (Benmelech, Frydman, and Papanikolaou Reference Benmelech, Frydman and Papanikolaou2019; Hausman, Rhode, and Wieland Reference Hausman, Rhode and Wieland2019; Ziebarth Reference Ziebarth2013). This chapter demonstrates that the nontradable sector had a sizeable impact on the health of the local economy even well into the recovery due to its relatively high concentration of skilled occupations. I isolate this skill-biased structural transformation using a new panel of city-level financial and economic data constructed from state tax reports, court documents, congressional hearings, census microdata, and bank balance sheets.

The first set of results establishes the causal effect of local credit supply shocks on local economic growth from 1929 to 1940. Building on Carlson and Mitchener (2009), I show pre-crisis access to Bank of America was positively correlated with local lending growth from 1929 to 1934 but not city economic activity trends before 1929. In contrast, the post-1929 dynamic effects were large. Higher levels of local loan supply halved the contemporaneous contraction, confirming earlier analysis of the 1930 to 1932 waves of bank crises (Calomiris and Mason Reference Calomiris and Mason2003). The initial real effects compounded in the recovery; not only did Bank of America-branched economies recoup their losses sooner, but they grew substantially in the latter half of the 1930s. Access to this large, unusually generous bank both softened the initial recession and accelerated cities’ economic recoveries.

Bank of America’s lending policy altered the composition of local employment by reallocating labor towards high-skilled occupations. I compare male California workers’ labor outcomes based on their exposure to the aggregate credit shock during the 1930s, controlling for pre-crisis characteristics with the automated matching between the 1930 and 1940 population censuses. Levels of unemployment and labor force participation did not vary based on crisis credit conditions, confirming that even non-branched places had recovered from the Depression by 1940. Although aggregate employment was similar, cities’ occupational and industrial shares had shifted based on credit supply exposure, which explains why workers in Bank of America-branched areas were earning higher wages in 1940 than their non-branched equivalents. Workers had moved out of agriculture and into higher-skilled retail and service work in credit-rich areas, which, crucially, were consumed and produced locally. Even in the recovery, spatial differences in loan supply affected the skill composition of the economy, leading to continued divergence in economic growth.

LIQUIDITY CONSTRAINTS AND HOUSING MARKETS: EVIDENCE FROM THE WWI VETERANS’ BONUS

The New Deal sought to stimulate moribund mortgage lending markets and reduce the debt service burden on existing mortgages. However, geography directly shaped New Deal housing policy through practices such as redlining, making it difficult to disentangle the impact of household behavior from regional economic responses. In the second chapter of my dissertation, I examine the housing market effects of the WWI Veterans’ Bonus, circumventing these issues. In 1936, WWI veterans received a surprise payment which was on average equivalent to one year of income, which many of them earmarked for housing consumption (Hausman Reference Hausman2016).Footnote ³

I show that the Veterans’ Bonus benefited WWI veterans on both the home ownership and home value margins, which is consistent with recent analysis on several New Deal housing programs summarized in Fishback (Reference Fishback2017). I expand on prior work by using an observable individual variation, which allows me to analyze both the direct and spillover effects of cash shocks on housing markets during the 1930s. The Bonus effect was largest in Bank of America-branched places, suggesting some degree of non-veteran crowdout in housing markets with more local liquidity provision.

To account for a variety of potential threats to identification, like housing preferences and pre-Depression characteristics, I compare WWI veterans to their 1930 next-door neighbors. Census enumerators were instructed to go door to door when canvassing, so households located next to each other on the census sheet were extremely likely to be neighbors. Then, again applying an automated linking algorithm to the 1930 and 1940 full count censuses, I construct a panel of WWI veterans and their pre-Bonus neighbors’ housing outcomes.

The Veterans’ Bonus provided a substantial benefit to WWI veterans during a period of limited credit availability. Eligibility for the Veterans’ Bonus offset between one-tenth and one-sixth of the aggregate decline in housing prices from 1930 to 1940. These results are even larger when considering only those who sought out mortgages during the Depression. Veteran renters in 1930 had 1940 homeownership rates and home values relative to their non-veteran renting counterparts, which were roughly 1.25 to 1.5 times larger than the baseline difference. These effects were magnified by the size of the economic recovery; the gap between veterans and non-veterans was widest in Bank of America-branched areas. Even in local economic booms, liquidity provision largely benefited those who received it directly, indicating there was limited potential for spillovers to redistribute these gains.

HUMAN CAPITAL FORMATION AND REGIONAL RECOVERY FROM THE GREAT DEPRESSION

The final chapter of the dissertation, co-authored with Zachary Bleemer, turns to the impact of the financial crisis on new workers. We examine how regional Depression severity, proxied by Bank of America’s 1929 branch network, affected college-going behavior during the 1930s. Our focus on how education affects intergenerational mobility builds on earlier work by Goldin and Katz (Reference Goldin and Katz1999) to show how the composition of college-going changed in the Great Depression based on childhood income and local economic conditions.

First, we examine college-going from 1920 to 1940 using a newly constructed database covering most university students in California over that period. Digitized from university registers, these data include students’ names, hometowns, fields of study, and years of enrollment and cover all four-year public and several private California colleges and universities. Although college-going was already relatively widespread for both men and women in this setting, there were significant gender differences in major choice. Women were largely letters and science majors while men were more evenly split between letters and sciences, business, chemistry, and agriculture. The latter two degrees earned particularly high returns in terms of 1940 wage and salary income.

With these stylized facts in hand, we turn to the effect of local business conditions on college sending behavior. We measure the effect of Bank of America’s presence on the number of first-year students in each city sent to college each year in a difference-in-difference approach.Footnote ⁴ Reassuringly, in the 1920s, there were no differences in college-sending behavior by Bank of America status. During the Depression, however, Bank of America-branched towns were more likely to send students to college.

The last piece of analysis matches the college registers to the 1930 and 1940 censuses, linking Depression severity, major choice, and labor market returns for men attending college in California in the 1930s. The average household occupation score, a measure of parental socioeconomic status in the 1930 census, fell during the 1930s for students from Bank of America-branched towns. Despite this decline in childhood socioeconomic status, these students earned higher incomes in 1940 due to their move into high-return majors. Regional variation in Depression magnitude, therefore, altered the geography of intergenerational mobility through the combination of these shifts in college attendance and major selection.

Sarah Quincy, Vanderbilt University

REFERENCES

Benmelech, Efraim, Frydman, Carola, and Papanikolaou, Dimitris. “Financial Frictions and Employment during the Great Depression.” Journal of Financial Economics 133, no. 3 (2019): 541–63.

Bernanke, Ben S. “Nonmonetary Effects of the Financial Crisis in the Propagation of the Great Depression.” American Economic Review 73, no. 3 (1983): 257–76.

Bonadio, Felice A. AP Giannini: Banker of America. Berkeley, CA: University of California Press, 1994.

Calomiris, Charles W., and Mason, Joseph R.. “Consequences of Bank Distress during the Great Depression” American Economic Review 93, no. 3 (2003): 937–47.

Carlson, Mark, and Mitchener, Kris James. “Branch Banking as a Device for Discipline: Competition and Bank Survivorship during the Great Depression.” Journal of Political Economy 117, no. 2 (2009): 165–210.

Fishback, Price. “How Successful Was the New Deal? The Microeconomic Impact of New Deal Spending and Lending Policies in the 1930s.” Journal of Economic Literature 55, no. 4 (2017): 1435–85.

Friedman, Milton, and Anna Jacobson, Schwartz. A Monetary History of the United States, 1867–1960. Princeton, NJ: Princeton University Press, 1963.

Goldin, Claudia, and Katz, Lawrence F.. “The Shaping of Higher Education: The Formative Years in the United States, 1890 to 1940.” Journal of Economic Perspectives 13, no. 1 (1999): 37–62.

Hausman, Joshua K. “Fiscal Policy and Economic Recovery: The Case of the 1936 Veterans’ Bonus.” American Economic Review 106, no. 4 (2016): 1100–43.

Hausman, Joshua K., Rhode, Paul W., and Wieland, Johannes F.. “Recovery from the Great Depression: The Farm Channel in Spring 1933.” American Economic Review 109, no. 2 (2019): 427–72.

Reinhart, Carmen M., and Rogoff, Kenneth S.. This Time Is Different: Eight Centuries of Financial Folly. Princeton, NJ: Princeton University Press, 2009.

Richardson, Gary, and Troost, William. “Monetary Intervention Mitigated Banking Panics during the Great Depression: Quasi-Experimental Evidence from a Federal Reserve District Border, 1929–1933.” Journal of Political Economy 117, no. 6 (2009): 1031–73.

Schularick, Moritz, and Taylor, Alan M.. “Credit Booms Gone Bust: Monetary Policy, Leverage Cycles, and Financial Crises, 1870–2008.” American Economic Review 102, no. 2 (2012): 1029–61.

Ziebarth, Nicolas L. “Identifying the Effects of Bank Failures from a Natural Experiment in Mississippi during the Great Depression.” American Economic Journal: Macroeconomics 5, no. 1 (2013): 81–101.

LAND CONCENTRATION AND LONG-RUN DEVELOPMENT IN THE FRONTIER UNITED STATES

My first chapter studies a long-standing question in economics regarding the relative efficiency of different modes of land ownership. This question has interested economists at least since Adam Smith, who favored owner cultivation. Smith and some other contemporaries argued that large landlords harmed productivity through the weak incentives of their workers and rent-seeking behavior (Smith Reference Smith, Strahan and Cadell1776), a concern formalized into classic economic theory by Marshall (Reference Marshall1946). On the other hand, landlords might be able to contract around any inefficiencies (Cheung Reference Cheung1969) and could provide the benefits of scale economies in agriculture or public goods provision (Allen Reference Allen1988; Hornbeck and Naidu Reference Hornbeck and Naidu2014; Olmstead and Rhode 2001; Dell Reference Dell2010). Finally, the Coase Theorem (Coase Reference Coase1960) holds that under ideal conditions, market transactions will efficiently distribute productive assets regardless of initial allocations. In practice, such dynamics depend on the size of transaction costs and the enforceability of property rights (Hornbeck Reference Hornbeck2010; Jones et al. Reference Jones, Kondylis, Loeser and Magruder2019). Throughout history, different societies have distributed land in diverse fashions, but it is thus unclear which, if any, could positively impact long-run prosperity.

In this chapter, I use a natural experiment embedded in American land policy to quantify the effects of land concentration on the long-run economic development of frontier areas. Although this region is often popularized as the domain of hard-scrabble pioneers, the reality was more complex. My work contrasts the effects of two major pillars of nineteenth-century American land policy, which collectively distributed about 25 percent of the country’s area in a foundational time for many of its states. With the 1862 Homestead Act, the Union government aimed to reserve the frontier for small farmers, instituting a maximum size for settlers’ plots. Paradoxically, however, the government simultaneously gave large areas in grants to railroad companies as payment for their construction efforts. These companies, in turn, auctioned their properties off in sizable blocks to wealthy purchasers. The two policies were frequently applied arbitrarily in a checkerboard board pattern, meaning square miles of land were settled either by small farmers or large owners in an alternating pattern. The locations of these squares were pre-determined by land survey systems, meaning that the two groups of land were statistically equivalent in terms of their characteristics.

Drawing on several original data sources, I find that that historical land concentration led to fewer, less developed farms. Low levels of investment by large landlords in the 1800s are still apparent in reduced land values 150 years later. In the former railroad lands, modern values of improvements are lower by 23 percent, total property value by 4.5 percent, and population by 8 percent. The negative impacts occur primarily in counties with high rates of crop share agreements relative to other forms of tenancy, consistent with the classical literature that emphasized the negative incentive effects of share tenancy (Marshall Reference Marshall1946). I find little evidence for other explanations, including elite capture of political systems.

The geographic breadth of my data sources allows me to estimate the ideal land policy over a large portion of the frontier United States. My modern property data cover roughly 12 million properties spread over 380,000 square miles in six states, collectively worth about $2.7 trillion in 2017. Using my results and historical estimates of land clearing costs, I can compute land values under counterfactual policies. Applying recent advances in combinatorial optimization, I find that the ideal land policy would have increased the overall amount of land to small-scale homesteaders, particularly in productive lands which required high levels of complementary investments. Overall, I estimate that the optimal property rights allocation would have increased my sample’s agricultural land values by $28 billion (4.8 percent) in 2017. This figure decreases only slightly if the government is constrained to give railroad companies roughly the same payout as it did historically. Thus, the American government could have realized most of the gains from an efficient land policy without needing an alternate source of funds for its industrialization.

WHEN COERCIVE ECONOMIES FAIL: THE POLITICAL ECONOMY OF THE U.S. SOUTH AFTER THE BOLL WEEVIL

The second chapter, joint with James Feigenbaum and Soumyajit Mazumder, considers how disruptions to agriculture can have political economy impacts. Cotton cultivation formed the politics and institutions in the Jim Crow South, leading to many personal and civic restrictions on the lives of Black Americans. Beginning in the early 1900s, many African Americans thus chose to leave the South for other regions of the country, a movement known as The Great Migration. According to some historical accounts, this migration was accelerated by the boll weevil, a cotton pest that greatly harmed cotton farming (Lange, Olmstead, and Rhode Reference Lange, Olmstead and Rhode2009). From an econometric standpoint, this is a useful event to study, as the boll weevil’s spread from its entry point near Brownsville, Texas, was primarily based on wind patterns and geographic distance rather than political or cultural factors (Ager, Brueckner, and Herz Reference Ager, Brueckner and Herz2017).

How did the Jim Crow system respond to these shocks? We employ a difference-in-difference estimation strategy at the county level, making use of the boll weevil’s spread throughout the cotton belt, 1892–1922. According to our results, once the boll weevil arrives in a typical county, the Black population begins to fall, ultimately becoming lower by about 5–25 percent, depending on specification. Simultaneously, anti-Black violence in the form of lynchings also falls, a drop equal to about 100 percent of the sample mean across the whole period.

We argue in the paper that these results imply African Americans retained a limited amount of political agency through their ability to “vote with their feet” against the excesses of Jim Crow, in keeping with Albert Hirschman’s notions of “voice” and “exit.” Worried at the prospect of losing a formerly captive labor force, white Southern planters used their considerable influence to moderate violence against African Americans, reducing one of the factors leading to migration.

Although our results are certainly more heartening than a plausible counterfactual in which violence increased in response to Black migration, in other respects, it highlights how limited the avenues for political expression were under Jim Crow. Voting with your feet is far more arduous than voting in a free election and while anti-Black violence decreased substantially, ultimately was an incremental change in a system that would still require decades of reform.

EVOLVING COMPARATIVE ADVANTAGE AND THE IMPACT OF CLIMATE CHANGE IN AGRICULTURAL MARKETS

The third chapter, joint with Arnaud Costinot and Dave Donaldson, studies the long run of the next century and how land use will be shaped by climate change. A large literature in economics and climate science has documented that a warming planet will significantly impact agricultural productivity worldwide. Many of these changes will be negative as already hot countries find it more difficult to grow in increasing temperatures. On the other hand, cold areas in other countries may become arable in the coming years. This paper aims to quantify the aggregate consequences of these micro-level shocks.

To approach this problem, we use micro-level data on potential crop yields from the FAO GAEZ project. The data report potential yields for a large number of crops in 1.7 million grid cells measuring around five kilometers on each side. Crucially, these data are reported both for current conditions and under a number of models of climate change. We combine these data with a structural model of demand and production, calibrating its parameters to baseline data on prices and output. We can compute counterfactual welfare, then, by simply replacing fields’ productivity data with their estimated data under a climate change scenario and computing a new equilibrium.

Our results indicate a substantial negative impact on welfare from climate-driven changes to crop productivity, though with substantial heterogeneity by country. On net, welfare losses amount to about 15 percent of the GDP contribution of our modeled crops. However, the impact is actually positive in some countries like Russia, which will see its crop frontier expand. On the other hand, already warm countries in our sample like Malawi will face even more substantial losses. The impacts of climate change are mitigated substantially by the ability of farmers to adapt and change their crop choice, but they are only slightly mitigated by the ability of countries to trade with each other for crops they need.

Overall, my dissertation suggests a large role for land use in long-run development, both in economic and political arenas. As the world adapts to a changing climate, the importance of land will continue as part of the long-run development of the future.

Cory Smith, Massachusetts Institute of Technology

REFERENCES

Ager, Philipp, Brueckner, Markus, and Herz, Benedikt. “The Boll Weevil Plague and Its Effect on the Southern Agricultural Sector, 1889–1929.” Explorations in Economic History 65 (2017): 94–105.

Allen, Robert C. “The Growth of Labor Productivity in Early Modern English Agriculture.” Explorations in Economic History 25, no. 2 (1988): 117–46.

Cheung, Steven. The Theory of Share Tenancy. Chicago: University of Chicago Press, 1969.

Coase, Ronald H. “The Problem of Social Cost.” Journal of Law and Economics III (1960): 1–44.

Dell, Melissa. “The Persistent Effects of Peru’s Mining Mita.” Econometrica 78, no. 6 (2010): 1863–903.

Hornbeck, Richard. “Barbed Wire: Property Rights and Agricultural Development.” Quarterly Journal of Economics 125, no. 2 (2010): 767–810.

Hornbeck, Richard, and Naidu, Suresh. “When the Levee Breaks: Black Migration and Economic Development in the American South.” American Economic Review 104, no. 3 (2014): 963–90.

Jones, Maria, Kondylis, Florence, Loeser, John Ashton, and Magruder, Jeremy. “Factor Market Failures and the Adoption of Irrigation in Rwanda.” World Bank Policy Research Working Paper No. 9092, Washington, D.C., December 2019.

Lange, Fabian, Olmstead, Alan L., and Rhode, Paul W.. “The Impact of the Boll Weevil, 1892–1932.” Journal of Economic History 69 no. 3 (2009): 685–718.

Marshall, Alfred. Principles of Economics. New York, NY: Cosimo, Inc., 1946.

Olmstead, Alan L., and Paul W. Rhode. “Reshaping the Landscape: The Impact and Diffusion of the Tractor in American Agriculture, 1910–1960.” Journal of Economic History 61, no. 3 (2001): 663–98.

Smith, Adam. The Wealth of Nations. London: Strahan, W. and Cadell, T., 1776.

THE LONG RUN IMPLICATIONS OF SLUM CLEARANCE

In my first chapter, titled “The Long-Run Implications of Slum Clearance: A Neighborhood Analysis,” I theoretically and empirically analyze the federal urban renewal and slum clearance program. This program was established as part of the Housing Act of 1949 and became one of the largest and most controversial policies used to rehabilitate neighborhoods in the United States. The urban renewal and slum clearance program provided federal money to cities to demolish blighted urban areas, which were then redeveloped with locally planned urban renewal projects. The qualitative narrative surrounding this program is overwhelmingly negative in its assessment and highlights the controversies surrounding the program, focusing specifically on the displacement of black residents (e.g., Jacobs Reference Jacobs1961; Anderson Reference Anderson1964). The previous quantitative analysis of this program has shown that cities with greater program participation saw positive and economically significant effects on income, property values, and the population at the city level (Collins and Shester Reference Collins and Shester2013). However, a lack of systematic data collection of each project’s location within a city has hindered researchers’ ability to quantitatively analyze this program on a more granular geographic level.

I began my analysis by constructing a new dataset documenting the locations of approximately 200 urban renewal projects that were implemented between 1949 and 1965 across 28 large U.S. cities. I use this newly constructed dataset, along with decennial census data at the census tract level, to examine the characteristics of neighborhoods cleared for redevelopment and the effect that urban renewal projects had on neighborhoods over time. I find strong evidence that the program disproportionately targeted black neighborhoods for slum clearance. Conditional on experiencing urban blight, neighborhoods with an above-average share of black residents were two to three times more likely to be cleared and redeveloped as compared to white neighborhoods with similar observable characteristics. Further, redeveloped neighborhoods experienced a 12 percent decline in housing density and a 24 percent increase in median rents. This change in the housing structure of redeveloped neighborhoods was associated with a 13 percent decline in population density, a 16 percent decline in the share of black residents, and an 18 percent increase in median incomes.

These results are consistent with predictions from a spatial equilibrium model of locational choice. This theoretical framework highlights the importance of spillover effects caused by clearing neighborhoods and redeveloping them with fewer, more expensive housing units. The theory suggests that displaced residents increased the demand for housing in other neighborhoods within an impacted city, ultimately putting upward pressure on housing costs in other areas of the city that were not directly redeveloped.

RACE, RISK, AND THE EMERGENCE OF FEDERAL REDLINING

Another way in which the federal government intervened in housing markets during the twentieth century is through the creation of the Home Owners’ Loan Corporation (HOLC). HOLC was established as a response to the Great Depression to buy and refinance troubled home loans. After acquiring over one million loans, HOLC created a set of maps for every major city in the United States to summarize the spatial variation in the riskiness of mortgage lending in different neighborhoods. These maps, which were intended to help manage the risk associated with its newly acquired mortgage portfolio, had red lines around the riskiest neighborhoods.Footnote ² Most black households were concentrated in the highest risk zones in these maps, and many formerly redlined neighborhoods remain economically distressed today. The HOLC maps, in conjunction with contemporaneous maps produced by the Federal Housing Agency (FHA), have become visual shorthand for government-sanctioned housing market discrimination and are at the center of modern debates regarding the long-run impacts of government-sponsored redlining on neighborhood segregation.

My second dissertation chapter (joint with Price Fishback, Allison Shertzer, and Randall Walsh), titled “Race, Risk, and the Emergence of Federal Redlining,” provides a systematic empirical evaluation of the construction of redlining maps in the late 1930s. We assess to what extent the prevalence of black households in redlined neighborhoods stems from the underlying economic disadvantage faced by black individuals and families as opposed to racial discrimination in the construction of the maps themselves. We create a spatial dataset that combines data from individual households and neighborhoods for nine of the ten largest cities in the United States in 1930 and 1940 with digitized HOLC maps and survey information that accompanied each map. We use this data to perform various empirical exercises, including documenting how housing and economic characteristics varied across neighborhood risk ratings and exploring how these characteristics varied at the boundaries between differentially ranked neighborhoods. The maps appear to have accurately delineated neighborhoods on different trajectories that would have impacted lending risk over the long term.

We then perform a set of counterfactuals to eliminate any potentially discriminatory boundary placement. We find that racial bias in the construction of the HOLC maps can explain at most a small fraction of the observed concentration of black households in redlined zones. Instead, our results suggest that the majority of black households were redlined because decades of disadvantage and discrimination had already pushed them into the center of economically distressed neighborhoods prior to the government’s direct involvement in mortgage markets. We conclude that the HOLC maps are best viewed as providing clear evidence of how decades of unequal treatment effectively limited where black households lived in the 1930s, rather than reflecting racial bias in the construction of the maps themselves.

RACIAL DISPARITIES IN DEBT COLLECTION

Discrimination against black Americans in both private and public spheres has contributed to the segregated and unequal society we live in today. The distinct set of disadvantages experienced by black Americans increases their likelihood of experiencing negative financial shocks and decreases their ability to mitigate the impact of these shocks. My third dissertation chapter, titled “Racial Disparities in Debt Collection” (joint with Domonkos Vamossy), documents a disparity in debt collection judgments across black and non-black neighborhoods in the present day. Through the use of a novel dataset that links debt collection court cases from Missouri with information from Experian credit reports, we find that majority-black neighborhoods experience approximately 40 percent more judgments than non-majority-black neighborhoods, even after controlling for differences in median incomes, median credit scores, and default rates. The racial disparity in judgments cannot be explained by differences in debt characteristics across black and non-black neighborhoods, nor can it be explained by differences in attorney representation, the share of contested judgments, nor differences in neighborhood lending institutions. While we cannot fully disentangle the extent to which the remaining judgment gap is due to discrimination or other unobservable characteristics, back-of-the-envelope calculations suggest closing the racial wealth gap would simultaneously close the gap in debt collection judgments. This result highlights that even if no discrimination is currently present in the debt collection system, historic discrimination has contributed to the modern-day racial wealth gap and, therefore, still contributes to disparate outcomes across black and non-black neighborhoods today.

Jessica LaVoice, Bowdoin College

REFERENCES

Anderson, Martin. The Federal Bulldozer. A Critical Analysis of Urban Renewal, 1949–1962. Cambridge, MA: The MIT University Press, 1964.

Chetty, Raj, and Hendren, Nathaniel. “The Impacts of Neighborhoods on Intergenerational Mobility I: Childhood Exposure Effects.” Quarterly Journal of Economics 133, no. 3 (2018): 1107–62.

Chetty, Raj, Hendren, Nathaniel, Kline, Patrick, and Saez, Emmanuel. “Where Is the Land of Opportunity? The Geography of Intergenerational Mobility in the United States.” Quarterly Journal of Economics 129, no. 4 (2014): 1553–623.

Chetty, Raj, Stepner, Michael, Abraham, Sarah, Lin, Shelby, et al. “The Association between Income and Life Expectancy in the United States, 2001–2014.” Jama 315, no. 16 (2016): 1750–66.

Collins, William J., and Shester, Katharine L.. “Slum Clearance and Urban Renewal in the United States.” American Economic Journal: Applied Economics 5, no. 1 (2013): 239–73.

Jacobs, Jane. The Death and Life of Great American Cities. New York, NY: Random House, 1961.

ENRIQUE JORGE-SOTELO

The objective of this thesis is to examine the performance of Spanish banking, monetary policy, and exchange rate policy during the Great Depression. Recent multinational histories of the Great Depression-era have suggested that Spain was able to ride out the Great Depression due to the policy flexibility provided by its floating exchange rate. Jorge-Sotelo is skeptical.

The story begins with a 1921 law intended to modernize Spanish banking affairs. The new law granted Spanish banks the ability to borrow money at the Bank of Spain using government bonds as collateral. Importantly, this borrowing ability was not limited.

With exchange rates stable or rising before 1927, there were few problems with this new arrangement. However, from 1927 onward, the exchange rate began to fall. Simply put, the Bank of Spain could not raise the discount rate to stabilize the exchange rate because the banks just substituted borrowing with public debt as collateral. With the exchange rate continuing to fall, several monetary interventions were a failure. In 1930, the government needed to raise its gold holdings to pay its international debts, and it issued a series of gold bonds. This led the Spanish banks to contract short-term debt in foreign markets to obtain foreign gold to buy the new Spanish gold bonds. This then exposed them to the April 1931 bank runs when the new Republic came to power.

For the period 1927q1 to 1932q3, Jorge-Sotelo digitalized a heretofore unused set of banking records giving bank quarterly assets and liabilities. A regression analysis shows that the discount rate had little effect on bank lending.

Moving ahead from these results, Jorge-Sotelo proposes that in this period, Spain should be considered an emerging economy. As an emerging economy, regardless of the exchange rate regime, when monetary policy in the main creditor country changes, room for policy independence in the emerging economy only comes when it imposes capital controls. In a regression testing, the allocation of Bank of Spain resources among six of the largest Spanish banks, the only variable that was significant was whether a bank had a history of borrowing from the Bank of Spain!

In the final chapter, Jorge-Sotelo examines why Spanish banking failures were limited to four banks. The answer is straightforward. Banks were permitted to suspend their mark-to-market accounting during the crisis, allowing the credit side of their accounts to remain publically in good shape and to keep publically known bank losses to a minimum. Second, the banking authorities and the banks were absolutely silent about the depth of the banking crisis. I have attended courses and seminars in monetary theory and history for 55 years. Not one course or seminar paper focused on the role of secrecy and dissimulation in monetary matters. The Bank of Spain during the Depression could not have been the only central bank before or since to use these tools. Perhaps Jorge-Sotelo should make more of this. In any case, economists beware! We will now be inundated with papers on the optimal level of secrecy and dishonesty.

This thesis is a major revision of the conventionally told story of Spain’s Great Depression. As the Depression developed, Bank of Spain lending was limited. It was hamstrung by the 1921 law. In the crisis, the Bank of Spain lost lender-of-last-resort status and later had to resort to capital controls. Furthermore, its secret decisions were extremely important in containing bank instability. The key to the success of this thesis is Jorge Sotelo’s very strong grasp of the operations of the Bank of Spain and the nation’s private banks, backed by his excellent mobilization of new data and econometrics.

ADRIEN MONTALBO

Primary education is devoted to providing literacy, numeracy, and the inculcation of individual and social manners. The nineteenth century was crucial in spreading primary education to the French population. Across the same century, France was also undergoing a slow acceleration in its per capita output rate. Industrialization arose as a major force in this acceleration. Were there links between the growth of primary education and rising industrialism? Was their interaction causally one-way or two-ways?

French primary education from the French Revolution to the Guizot Law of 1833 was supported by parental fees or public investment. A striking feature of primary education in the post-Revolutionary period was that it remained largely concentrated in the regions to the north of the east-west St Milo-Geneva line. Prior research has suggested that the regional diversity was due to three factors: the large variance across regions in economic resources, population concentration, and the length of their previous history of primary education. Montalbo’s important contribution is to establish that school institutional features also mattered, most importantly the difference between the private and public schools.

The Guizot Law of 1832 required that all municipalities with 500 inhabitants maintain a primary school. Fortunately, the law was accompanied by a recent survey of primary education in 22 departments and 8,129 municipalities. Of the municipalities, 59 percent had at least one primary school. The municipal coverage of the survey was incomplete, but every large region of France was covered. The survey collected data on school fees, salaries, accommodations, classrooms, municipal occupations and salaries, the number of subjects taught, and schooling years. What a treasure chest for any economic historian!

With regard to the effects of industrialization Montalbo’s analysis of the Guizot Survey shows a clear relationship between a district’s economic resources and municipal investment in primary schools. The districts with more economic resources were associated with lower fees to the parents. Lower fees were associated with greater enrollment, a good Smithian result. Municipally supported public schools were also associated with more highly qualified teachers, more classroom discipline, more subjects taught, and longer school years. In sum, municipal investment meant the students were learning more. It does seem to me that it would have been helpful if Montalbo had subjected his entire array of variables to factor analysis prior to his regressions. Factor analysis is a technique intended to be an improvement on eye-balling, which often comes with prior beliefs.

Montalbo then finds a strong positive impact of industrialization on primary education due to industrialization’s positive effect on the tax base of local government. Local governments chose to spend the augmented revenue on primary school investments. Montalbo then draws on the heights of military recruits by the district to instrument the economic level of a municipality. He concludes that districts with a higher standard of living were also districts with higher enrollment rates, stronger concentrations of primary schools, and larger municipal grants. In a regression analysis, he finds height and the presence of factories each had a strong positive impact on the presence of primary schools. The share of Protestants in the population was also a strong positive variable; see Max Weber.

Economic historians producing new data must do the essential job of understanding the social context of the data sources as well as the surrounding economy. This thesis does an excellent job in these matters.

ROBIN JOHN CHARLES ADAMS

This thesis is a history of the financing of the Irish Republic’s war of independence, which lasted from 1919 to1921. The war was led by a clandestine government, the Dail Areann, established by the Irish Nationalist parliamentarians who refused to seat themselves in London.

The first four chapters develop chronological narratives of the politics, organization, marketing, and subscribers of the Irish National Loan. The Dail limited any opportunism by creating a multi-level organization for reporting every subscriber transaction. The Sinn Fein, the IRA, and the Catholic church were used to build the structure for the fundraising. Fund marketing began with secret promotional meetings for the wealthy and loyalists. The smaller bond buyers were approached later with door-to-door solicitation and after Mass.

Chapter 4 is one of the most original chapters of the thesis, a demography of the secret subscribers to the National Loan. The subscriber’s identity, address, and the amount of their subscription were noted in registers. Adams was able to locate registers in three constituencies. There were 409 other names found, making a total of 6,233 subscribers. The 1911 census of Ireland was searched, yielding 3,298 cross-referenced names, permitting description by age, literacy, religion, and occupation.

Examining these data, Adams found subscribers were more literate than others in their respective provinces. Adams performs probit marginal tests on the likelihood of giving or not giving and the amounts of the fund’s subscribed. In the likelihood-of-giving regressions, the strongest marginal effects were from priests, shopkeepers, publicans, and farmers. In the amounts given, the first three had strong marginal effects. Participation in the pre-1919 fundraising produced strong positive marginal coefficients, as did the subscribers’ use of the Irish language. Again, I think factor analysis of these data set would have been useful to tease out the hidden, often interesting correlates.

The total subscription to the Irish National Loan was quite large: 355,000 pounds. This compared favorably with the recent Anti-Conscription Fund of 1918, which gathered 250,000 pounds. Michael Collins, the Minister of Finance, specifically wanted large numbers of small subscribers to the Irish National Loan, and he appears to have gotten it. Of the 355,000 pounds raised nationally, 257,849 pounds were raised from those giving 1 to 5 pounds.

As with the Irish Loan, Adams’ American chapters chronicle the politics, fundraising organization, marketing, and the characteristics of the subscribers. By 1915, before the Easter Rising, the Clan na Gail had created the Friends of Irish Freedom in the United States. With the creation of the Dail, the Friends of Irish Freedom immediately started an “Irish Victory Fund” in February 1919, successfully raising $1 million.

On 17 January 1920, the Dail campaign for its own 1^st External Loan was launched with door-to-door marketing. Because transactions in post-dated bonds of an unrecognized government were questionable for American bankers, the Dail decided that the post-dated bonds would be sold as “bond contracts,” convertible into bonds when the United States recognized the Irish Republic.

The total raised by the closing date of 14 October 1921 was $5,151,800. The total number of subscribers was 276,279. As with the Irish Loan, it was the little contributors who made the 1^st External Loan a success in the United States. If one counts those who subscribed up to the $30 (6 pounds), 60 percent of the money was raised from 90 percent of the subscribers. Adams is well aware of previous funding efforts by the revolutionary forces in Hungary and the Confederate South. Strangely missing is some comment on any international support offered to the pre-1917 revolutionary forces in Russia and Poland.

If I have my sums correctly, the Irish Victory fund, the National Loan, and the External Loan totaled 1.6 million pounds, a significant amount when compared with the 397,000 pounds spent for the Royal Irish Constabulary and the Dublin Metropolitan Police. There cannot be many accounts of clandestine fundraising for a revolutionary independence party as thorough, scholarly, and interesting as this one.

In honor of Alexander Gerschenkron, a master of both narrative and quantitative economic history, the Gerschenkron prize goes to Robin Adams, who has crafted an original, interesting, and exhaustive history of the financing of the Irish Revolution of 1919 to 1921.

Michael Edelstein, Queens College and The Graduate School, City University of New York

INDIRECT DEBT MONETIZATION, CREDIT AND ASSET BOOMS, AND THE EXTERNAL CONSTRAINT

From 1921, a new banking law allowed Spanish banks to borrow from the Banco de España (BdE henceforth), at their initiative, and using public debt as collateral at rates set below the nominal yield of public debt. By legislating to improve the liquidity of the banking sector, the government introduced a system of indirect debt monetization that secured strong demand for government bonds in a moment of weak public finance.

As the foreign capital bonanza of the mid-1920s came to an end, and capital outflows accelerated from 1928,Footnote ⁴ Spanish banks continued to use this system of indirect debt monetization to expand lending and fuel a stock market boom. In the presence of a growing external constraint (capital outflows and widening current account deficits), this materialized in the rapid deterioration of the exchange rate. Attempts at foreign exchange stabilization conflicted with persistent fiscal imbalances that provided additional liquidity for the ongoing credit and asset price boom. In turn, this boom reinforced the current account deficit in the context of capital outflows. Against this backdrop, the fall of the peseta was inevitable, even if publicly decried by policymakers.

DILEMMA OR TRILEMMA? THE 1931 SPANISH FINANCIAL CRISISFootnote ⁵

The fall of the Spanish peseta between 1928 and 1931 was a fundamental factor underlying the growing discredit of the Primo de Rivera Dictatorship on the economic front (1923–1930) and contributed to the discontent with the demanded but long-protracted transition towards democracy. As a result, the April 1931 local elections witnessed a landslide victory of Republican parties, and masses took the streets to proclaim the Second Spanish Republic. Despite attempts by the Provisional Republican Government to calm down bank depositors, the banking system lost 20 percent of its retail deposits between April and September 1931.

Banks turned to the discount window of the BdE for emergency liquidity while the fall of the peseta and capital flight accelerated. Developments in foreign exchange markets exposed the banking sector to growing currency and maturity mismatches; banks had incurred short-term debt denominated in foreign exchange (gold-convertible currencies) to purchase gold bonds issued by the Dictatorship in early 1930, as part of one of the failed interventions to stop the fall of the peseta. This caused monetary authorities´ options to boil down to a dilemma when the rapid flight from the peseta prevented the expansion of the monetary base to provide liquidity for the banking sector, and a credit crunch ensued. A month and a half into the crisis, the provisional Minister of Finance authorized a large increase in the fiduciary component of the monetary base at the same time that closed the capital account. Only then, the BdE was unconstrained to act as lender of last resort. I find that banks that suffered liquidity shortages contracted lending, while the rest continued to lend, showing that demand for credit remained strong during the crisis. However, aggregate lending collapsed by more than 20 percent. Rather than alleviating it, exchange rate depreciation contributed to worsening the impact of the banking crisis.

BAGEHOT ON HOLIDAY: THE ALLOCATION OF LIMITED EMERGENCY LIQUIDITYFootnote ⁶

Successful lender of last resort interventions depend crucially on the extent to which there is a balance of payments constraint and on the ability of banks and the central bank to maintain the liquidity of whatever is deemed as—or becomes during the crisis—“good,” eligible collateral. External constraints influence the potential size and boldness of the intervention and might justify the need of raising interest rates to optimize the allocation of limited liquidity.Footnote ⁷

While the previous chapter focused on the limitations imposed by an external constraint, this chapter shows that the absence of a clear and widely shared definition of “good” collateral and the reluctance to raise interest rates affected the allocation of limited emergency liquidity among Spanish banks. As the price of public bonds and private stocks fell during the crisis, borrowing on them as collateral became more expensive, and selling bills of exchange to the BdE provided extra liquidity to some banks. Until capital controls were in place, banks competed for central bank money, and early borrowers crowded out other banks from the discount window. This helps explain the contraction of credit at the bank level for the largest six banks in Spain, which accounts for the lion’s share of emergency liquidity provision during the crisis.

A QUIET BUT DEEP CRISIS: EXPLAINING BANKING STABILITY IN 1930s SPAIN

The last chapter deals with the puzzling stability of the Spanish banking sector during the 1930s, which I explain by documenting changes in accounting standards, namely the suspension of mark-to-market asset valuation. Following the collapse of the stock market in 1931, banks were allowed to close their 1931 books (and for subsequent years) reflecting 1930 asset prices.Footnote ⁸ I calculate a counterfactual estimate of the value of banks’ portfolios and the concomitant capital losses if portfolios are marked to market. This calculation shows very large protracted capital losses, pushing many banks to inevitable failure.

Finally, the complete silence and successful secrecy on the incidence of the crisis at the bank level by all policymakers also contributed to keeping the crisis “quiet.” These policy moves avoided a round of insolvencies caused by the fast and persistent fall of the stock market and widespread panic. However, they did not avoid the collapse in credit creation and financial intermediation and the sharp contraction in economic activity.Footnote ⁹

CONCLUSION

By looking at monetary and banking developments in Spain during the 1920s and 1930s, this thesis highlights the importance of emerging economies’ exposure to developments in international capital markets and how this exposure interacts with ongoing domestic macroeconomic and political instability and limits the policy reaction to financial crises, even in the context of floating exchange rates. External imbalances and capital flow reversals from 1928 feature essentially at the onset of the Great Depression; while foreign capital inflows during the 1920s relaxed Spain’s external constraints, these reverted from 1928, and the peseta began to fall rapidly. This limited monetary authorities’ reaction to the financial crisis of 1931; despite the policy reaction went in the right direction, a credit crunch ensued, and financial intermediation collapsed. Spain avoided large and widespread bank failures during the 1930s, but it was not because it did not have a banking crisis. A change in accounting standards that postponed a round of bank insolvencies and the complete secrecy about the actual scope of the crisis at the bank level helped contain the panic, but this could not reignite financial intermediation, and economic activity contracted sharply. While not denying other structural and political factors that were certainly at play, this thesis contributes to understanding the monetary and financial side of Spain’s fragile entry into the 1930s and questions the validity of the Spanish experience as a counterfactual for other countries’ policy options during the Great Depression.

Enrique Jorge-Sotelo, Universitat de Barcelona

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FIRST CHAPTER

The first part of this thesis is dedicated to understanding primary schooling development in France. I focus on the period going from the Revolution to the Guizot Law of 1833. However, as the spatial distribution of education remained stable in France until at least the mid-nineteenth century, the conclusions drawn from the analysis have a longer scope. In this first chapter, I look at the institutional factors that contributed to increasing the stability of primary schools’ presence and enhancing human capital accumulation in France.

I study the way primary education was operating from the Revolution to the Guizot Law in the absence of any law regulating primary instruction. The Revolution abolished taxes collected by the clergy, which were used to finance primary education. From this period of time to 1833, schools could be private and only financed by fees paid by families or public and financed by a mix between schooling fees and municipal subsidies.

I show that, after the Revolution, municipal authorities took over the control of instruction in richer and growing areas. Education was, therefore, more often publicly subsidized in these areas, and its financing burden was shared by all inhabitants through taxation. This had a crucial impact on primary instruction as municipal investment contributed to decreasing the level of schooling fees. The lower cost of education made schooling affordable for more families and was associated with higher enrollment rates. Also, I find that teaching conditions were better and human capital accumulation higher in the schools provided with municipal grants. Pupils stayed for a longer number of years in public schools and were learning more subjects than in the private ones.

Public investment in primary schooling is, therefore, a key element to understand the uneven distribution of schools, enrollment rates, and knowledge accumulation in France during the nineteenth century. This chapter adds to the existing literature on the determinants of educational expansion by showing that the organization of the schooling system may highly impact enrollment rates and human capital accumulation.Footnote ¹ Understanding the national or local institutional features of schooling systems appears, therefore, to be essential in accounting for the expansion of education during the nineteenth century.

SECOND CHAPTER

In the second chapter of the thesis, I analyze the impact of industrial activities on primary instruction in early nineteenth-century France. To do so, I rely on the industrial survey of 1839–1847, which reports the location and characteristics of all manufactures in France at that time. I study the impact of industrial activities both on primary schools’ presence and on enrollment rates.

By using the location of mineral deposits as an instrument for industrial activities, I first find a positive effect of factories’ presence on the location of primary schools. This impact was due to an increase in the supply of schools financed by municipalities. Indeed, industrial activities contributed directly to municipal resources through the patente, a tax collected on industrial production. As a result, municipalities where this production was high, were benefiting from higher economic resources coming from taxation.

However, I find no significant association between industry and the accumulation of human capital. I show that the presence of industry was not significantly linked with enrollment rates, while mining activities were negatively influencing this enrollment. I provide indications that this negative association was likely to be due to the employment of children within factories. Indeed, there was a negative correlation between the presence of industrial sectors relying highly on child work in a given municipality, textile and building in particular, and the enrollment within primary schools. Finally, I find no significant impact of industry on the number of schooling years. The presence of factories was therefore not associated with a higher volume of knowledge learned within primary schools.

This work sheds new light on the relation between industry and education during the first phase of industrialization.Footnote ² Industrial activities influenced positively the supply of schools through an income effect but had at best no impact on the demand for schooling. Therefore, elementary knowledge and skills acquired within primary schools appear to have been unrelated to industrial production, at least in the first part of the nineteenth century.

THIRD CHAPTER

The third chapter focuses on the association between primary schooling and economic development in nineteenth-century France and until WWI. To do so, I collected data on the economic resources of municipalities from publications by the Ministry of the Interior entitled La Situation Financière des Communes de France et de l’Algérie. These publications provide detailed information on the amount of taxes collected by municipalities, which I digitalized for the 1881 and 1911 years.

In order to assess if education contributed significantly or not to development at the local level, I take the average number of schooling years within municipalities alongside enrollment rates as indicators of educational achievement. I also investigate the relationship between schooling quality, proxied by the municipal investment in primary schools and the associated improved working conditions for teachers, and the level of future resources.

Firstly, I use the fact that the Guizot Law made it mandatory for any municipality with more than 500 inhabitants to open a primary school for boys. Therefore, I use a regression discontinuity around the 500-inhabitant threshold for municipalities with no schools in 1833. I find a positive and significant effect of being just above the legal threshold on future resources, with a magnitude of around one-third of a standard deviation in resources.

Secondly, I instrument primary education by the proximity of municipalities to printing presses established from 1450 to 1500. Indeed, numerous qualitative evidence links the development of literacy and the advent of the printing press. This strategy indicates that one more schooling year in 1833 was related to an increase of around 15 percent in the economic resources per capita of municipalities at the end of the century. A 1-percent increase in enrollment was associated with a 0.4 percent increase in resources. Primary schooling was, therefore, an important factor behind the growth of municipalities during the nineteenth century in France.

Finally, using a matching estimation technique, I find that schooling quality also mattered for the future development of municipalities with similar education achievement. Teachers’ qualification level seems, on the contrary, not to have mattered in this perspective.

This chapter sheds new light on the relation between education and economic development during the century of industrialization and modernization.Footnote ³ In this chapter, I show that primary schooling and basic education contributed to the growth of municipalities during this century in France, and therefore that their influence on technology adoption and productivity is very likely to have been strong at that time.

Adrien Montalbo, École des Hautes Études en Sciences Sociales Paris

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