'Loans for the Little Fellow:' Credit, Crisis, and Recovery in the Great Depression

This paper studies how structural transformation exacerbates financial crises. Using newly collected data, I document the persistent effect of credit supply shocks on local economies during the Great Depression. Cities with access to an unusually generous branching network were no different from other California cities in the 1920s but had significantly smaller recessions and stronger recoveries in the 1930s. Linked worker-level data demonstrate local credit supply shifted workers out of agriculture and into nontradable employment, which was higher-skilled, creating a lingering barrier to convergence.