Credit, Labor, and Political Unrest: Evidence from 1930s China

69 Pages Posted: 2 Sep 2017

See all articles by Fabio Braggion

Fabio Braggion

Tilburg University - Tilburg University School of Economics and Management; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Alberto Manconi

Bocconi University - Department of Finance; Centre for Economic Policy Research (CEPR)

Haikun Zhu

Erasmus University Rotterdam

Date Written: July 20, 2017

Abstract

Can tight credit inflame political unrest? We study a natural experiment from 1930s China, where the 1933 U.S. Silver Purchase program acts as a shock to bank lending. We assemble a novel, hand-collected dataset of loan contracts between banks and individual firms, labor unrest episodes, and underground Communist Party penetration. We show that the Silver Purchase shock results in a severe credit contraction, and that firms borrowing from banks with a larger exposure to the shock experience increased labor unrest and Communist Party penetration among their workers. These findings contribute to understanding the socio- political consequences of credit.

Keywords: Silver Purchase program, bank lending, political unrest, financial history

JEL Classification: G01, G21, N15, N25

Suggested Citation

Braggion, Fabio and Manconi, Alberto and Zhu, Haikun, Credit, Labor, and Political Unrest: Evidence from 1930s China (July 20, 2017). HKUST Finance Symposium 2017, Available at SSRN: https://ssrn.com/abstract=3031134

Fabio Braggion

Tilburg University - Tilburg University School of Economics and Management ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Alberto Manconi (Contact Author)

Bocconi University - Department of Finance ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://mypage.unibocconi.eu/albertomanconi/

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Haikun Zhu

Erasmus University Rotterdam ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

HOME PAGE: http://https://sites.google.com/site/zhuhaikun2018/home

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