Working Papers: "Intergenerational Effects of a Negative Wealth Shock: Evidence from the Closure of the Freedman’s Bank" (Job Market Paper) This paper provides a comprehensive analysis of the intergenerational effects of negative shock in wealth for African Americans by examining a historical episode, the failure of the Freedman's Bank (1865-1874). The bank failure resulted in the loss of deposits for approximately 100,000 depositors. I collect and match individual-level bank depositor records to the 1880 and 1900 Censuses for their descendants' literacy and occupation outcomes. To estimate the causal effect of depositing, I employ an instrumental variable strategy which exploits county-level differences in the take up rate in banking. Children of depositors were 37 percent more likely to be literate than children of non-depositors. This effect is explained by increase in children's literacy while the bank was in operation, which outweighs the negative impact of the wealth loss.
“The Freedman’s Bank and the Persistence of Mistrust” Survey data show large and persistent racial gaps in the utilization of banks. Historians have long hypothesized that the collapse of the Freedman’s bank in 1874 contributed significantly to the mistrust and underutilization of financial institutions by African Americans today. I will be the first to test this hypothesis using data. Using present day survey data, I find that African Americans are less likely to be banked if they reside in a county with higher exposure to knowledge of the bank collapse. In addition, for unbanked households, those who reside in a county with higher exposure to knowledge of the bank collapse are more likely to report “mistrust” in bank as the primary reason to be unbanked. Placebo effects are not present in the sample of white survey respondents, suggesting that the collapse of the Freedman’s Bank can partly explain persistent gaps in the utilization of financial services by African Americans.
Works-in-Progress:
“Can Free Health Care Save Infants? The Effect of the Emergency Maternity and Infant Care Program on Mortality”
“Does Representation Matter for Loan Outcomes? Evidence from Close Elections”