Access to Finance and Technological Innovation: Evidence from Antebellum America

We exploit antebellum America, a unique setting with staggered passage of free banking laws across states and well-documented differences in labour scarcity between free and slave states. We find that access to finance spurred innovation as measured by patenting activities, especially in free states where labour was scarce. In slave states, however, access to finance reduced the hiring costs of slave labour and discouraged innovation that substituted for slave labour.