The Bankruptcy Express: Market Integration, Organizational Changes, and Financial distress in 19th century Britain
Autor: Tobias Korn, Jean Lacroix
Nummer: 731, Nov 2024, pp. 65
JEL-Class: N63, L16, O33, R40, K35
Abstract:
This paper shows that amid aggregate gains, market integration generates within sector reallocation. To measure this effect, we collected new data on personal bankruptcies during the rail expansion in 19th century Britain. Our estimators leverage within geography-time and within sector-time variation to measure sector-specific effects of the rail on both employment and bankruptcies. A connection to railway increased bankruptcies only in the manufacturing sector, despite simultaneously increasing employment in that sector. Both a three-way fixed effects and a Least Cost Path approach validate the causality of our estimates. We further show that organizational changes that occurred in the manufacturing sector upon market integration explain our results: Firms expanded, self-employment decreased, occupations diversified; overall, the nature of labour changed. This biased growth of the manufacturing sector caused financial distress for some of its workers.
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