Sarah Quincy, Professor, Vanderbilt University
Abstract: This paper documents that the financial crisis of the early 1930s significantly hindered recovery from the Great Depression using newly-collected archival records to identify shocks to local credit supply. Due to regulatory constraints, the Bank of America did not select into better-performing cities in California before 1929, but a changein headquarters policy led them cut lending from 1929 to 1934 by 50 percent less thanthe median California bank. Bank of America branched cities had smaller contractions which quickly compounded into persistently stronger recoveries. Linked individual data demonstrate that local credit supply led to skill-biased structural change, creating a barrier to wage convergence for more credit-scarce areas even in 1940.