Credit and social unrest

Evidence from 1930s China

Fabio Braggion, A. Manconi, H. Zhu

Research output: Contribution to journalArticleScientificpeer-review

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 dataset 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.
Original languageEnglish
JournalJournal of Financial Economics
Publication statusAccepted/In press - Sep 2019

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Contraction
China
Communist Party
Penetration
Labor
Purchase
Credit
Bank lending
Loans
Credit shocks
Borrowing
Natural experiment
Workers
Trigger

Keywords

  • credit shocks
  • social unrest

Cite this

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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 dataset 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.",
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Credit and social unrest : Evidence from 1930s China. / Braggion, Fabio; Manconi, A.; Zhu, H.

In: Journal of Financial Economics, 09.2019.

Research output: Contribution to journalArticleScientificpeer-review

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AB - 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 dataset 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.

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