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No Exit: Notarial Bankruptcies and the Evolution of Financial Intermediation in Nineteenth Century Paris

Hoffman, Philip T. and Postel-Vinay, Gilles and Rosenthal, Jean-Laurent (2003) No Exit: Notarial Bankruptcies and the Evolution of Financial Intermediation in Nineteenth Century Paris. In: Finance, Intermediaries and Economic Development. Cambridge University Press , Cambridge, MA, pp. 75-108. ISBN 9780521820547. https://resolver.caltech.edu/CaltechAUTHORS:20160317-103340392

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Abstract

In early nineteenth-century Paris, notaries and bankers competed for the business of financial intermediation. They did so in an environment full of uncertainty and risk, for between 1808 and 1855, 143 bankers failed, and 26 notaries declared bankruptcy (Table 3.1). On average, nearly 12 percent of all banking houses and 3 percent of notarial businesses (études) went belly up in each five-year period between 1815 and 1855 – large figures in financial circles. Surprisingly, it was the bankers who emerged victorious from this competition even though they were the ones who failed more often. Here, we study the notaries they vanquished, in order to learn more about the interaction between competition, asymmetric information, and financial regulation. To explain the initial institutional evolution of notaries and bankers, we stress the importance of clients' learning, at least up to 1843. Thereafter, we examine how government intervention eliminated notarial bankruptcies and produced a fundamentally different equilibrium. Our interest in how financial intermediaries and clients interacted is inspired by Lance Davis's research on the role of competition and government regulation in financial markets. Davis, it is true, works on different topics, comparing distinct markets or analyzing financial flows from one location to another. Yet he, too, stresses clients' learning and savers' heterogeneity (in his words, “rubes and sophisticates”), and his approach has a direct echo in our model with two types of clients.


Item Type:Book Section
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http://dx.doi.org/10.1017/CBO9780511510892.005DOIArticle
http://ebooks.cambridge.org/chapter.jsf?bid=CBO9780511510892&cid=CBO9780511510892A014PublisherArticle
Additional Information:© 2003 Cambridge University Press.
Record Number:CaltechAUTHORS:20160317-103340392
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20160317-103340392
Official Citation:Philip T. Hoffman et al. (2003). No Exit: Notarial Bankruptcies and the Evolution of Financial Intermediation in Nineteenth Century Paris. In: Stanley L. Engerman et al. (eds.) Finance, Intermediaries, and Economic Development. pp. 75-108. Cambridge: Cambridge University Press.<http://dx.doi.org/10.1017/CBO9780511510892.005>
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:65424
Collection:CaltechAUTHORS
Deposited By: Susan Vite
Deposited On:28 Mar 2016 19:46
Last Modified:03 Oct 2019 09:47

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