The Investment Market, 1870–1914: The Evolution of a National Market

Abstract

It is necessary not only that capital be accumulated, but also that it be mobilized for productive use, if an economy is to benefit from an increase in capital per person. The classical model of resource allocation assumes that within any economy capital is perfectly mobile. It implies, therefore, that once allowance is made for uncertainty and risk, returns on investment are equal in all industries in all regions. Such a model, while logically consistent, is not very useful for analyzing the process of economic growth. In the early stages of development, because the uncertainty discounts are high, capital is not very mobile. As a result, rates of return vary widely between industries and between regions; and growth in high-interest regions is retarded. Development, in part then, takes the form of a reduction in uncertainty discounts—a reduction that makes it possible for capital to move more freely between regions and industries.

Historical Perspectives on U.S. Economic Geography

“…North (1961) and Harley (1980) find rapid convergence in the prices of goods such as lard, pork, flour, and wheat across regions between 1820 and 1860 (North 1961;Harley 1980). Davis (1965) finds marked convergence in interest rates by the early 1900s. 5 Finally, while there is convergence of wages and earnings by the mid-twentieth century, labor markets seem to have remained segmented for a longer period between the North and the South (Rosenbloom 1990;Margo and Villaflor 1987;Goldin and Margo 1992;Margo 2003).…”

Why do financial systems differ? History matters

“…The importance of local banks, the absence of nationwide banks Despite the many institutional barriers they faced, financial markets experienced a short- von Berlin" and owners of firms or corporations that were registered in Berlin. 5 Importantly, it is barriers to access to the stock market, rather than its malfunctioning, that seem to have limited its development. Gehrig and Fohlin (2004) argue that the Berlin Stock Exchange was surprisingly efficient for the time.…”

“…Gehrig and Fohlin (2004) argue that the Berlin Stock Exchange was surprisingly efficient for the time. 5 We thank to Martin Uebele and Stefan Volk for providing this information to us. Unfortunately, we could not obtain the price of these tickets.…”

Factor Endowments and the Returns to Skill: New Evidence from the American Past

“…Capital development in South, from the end of the Civil War to at least World War I, was rather ine¢ cient (Davis 1965, Sylla 1969, Wright 1987, Ransom and Sutch 2001, and …nancial institutions in the South were not structured in the same way as those in the Northeast and Midwest, with Southern banks much smaller than the national average and with higher interest rates in the South. This is important to the extent that capital markets in the U.S. were segmented in the early twentieth century.…”