DP12500 Savings Banks and the Industrial Revolution in Prussia Supporting Regional Development with Public Financial Institutions

Author(s): Sibylle Lehmann-Hasemeyer, Fabian Wahl
Publication Date: December 2017
Keyword(s): Industrialisation, Prussia, Public Infrastructure, Regional and Urban Development, Savings Banks
JEL(s): G21, N23, N74, N93, R11
Programme Areas: Development Economics, Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12500

We show that smaller, regional public financial intermediaries significantly contributed to industrial development, using a new data set of the foundation year and location of Prussian savings banks. This extends the banking-growth nexus beyond its traditional focus on the large universal banks, to savings banks. The saving banks had an impact through the financing of public infrastructure, such as railways, and new private factories. Saving banks were public financial intermediaries, so our results suggest that state intervention can be successful, particularly at early stages of industrial development when capital requirements are manageable, and access to international capital markets is limited.