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Journal of Financial Economics Vol. 138 No. 2 2020

Credit and social unrest: Evidence from 1930s China

Fabio Braggion1,2; Alberto Manconi1,3; Haikun Zhu4

1 Centre for Economic Policy Research · 2 Tilburg University · 3 Bocconi University · 4 Erasmus University Rotterdam

open access

Abstract

Do credit contractions trigger social unrest? To answer this question, we turn to a natural experiment from 1930s China, where the 1933 U.S. Silver Purchase program acts as a shock to bank lending. We assemble a hand-collected data set of loan contracts between banks and firms, labor unrest episodes, and underground Communist Party penetration. The Silver Purchase shock results in a severe credit contraction, and firms borrowing from banks with a larger exposure to it experience increased labor unrest and Communist Party penetration among their workers. These findings contribute to understanding the socio-political consequences of credit shocks.

DOI
10.1016/j.jfineco.2020.05.001
Volume
138
Issue
2
Pages
295-315
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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