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Published January 2015 | metadata_only
Journal Article

Entry, information, and financial development: A century of competition between French banks and notaries


Poorly developed financial markets are widely believed to block economic growth, because only modern financial intermediaries such as banks can mobilize large amounts of financial capital at low cost. This claim is supported by cross country regressions, but the regressions assume that credit intermediation is measured accurately before modern financial intermediaries arrive. If traditional intermediaries were mobilizing large amounts of financial capital before banks or other modern intermediaries appear, then the strength of the relationship between financial development and economic growth would be cast into doubt. Using an original panel dataset from nineteenth-century France, we provide the first estimates of how much financial capital key traditional intermediaries (notaries) were mobilizing for an entire economy during its first century of economic growth, and we analyze the lending that the notaries made possible in French mortgage market. The amount of capital they mobilized turns out to be large. We then analyze the effect that financial deepening had on the notaries as banks spread and find that the banks' and notaries' services were in all likelihood complements. The implication is that the link between financial development and economic growth may therefore be weaker than is assumed.

Additional Information

© 2014 Elsevier Inc. Received 11 December 2012. Available online 24 April 2014. We would like to thank the National Science Foundation, The Guggenheim Foundation, the Russell Sage Foundation, the Center of European and Eurasian Studies and the Collins Fund at UCLA, for financial support. We have benefited from the comments of Dave Grether, Thierry Magnac, Larry Neal, Steve Quinn, Peter Temin, Joachim Voth, Kirstin Wandschneider, the referees, and participants at seminars at Harvard, the All-UC meeting, and the Social Science History Association. The unstinting efforts of Maria Chichtchenkova, Alena Lapatniovna and Asli Sumer in photographing and coding the data are gratefully appreciated.

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August 22, 2023
August 22, 2023