Banking on railroads: The effect of market access on banking provision during the Gilded Age

Abstract

I examine the effect that market access, induced by the railroad network expansion, had on banking provision in nineteenth-century America. I find that market access increased the number of national banks. This effect operated via the extensive margin, with market access increasing the probability of having a national bank for affected counties. I find that counties had more national bank activity, with increased assets, loans, deposits, and other outcomes. I do not, however, find any effect of market access on banks already in operation. Market access therefore increased banking provision chiefly through the increased entry of national banks.