Credit and social unrest: Evidence from 1930s China
Journal of Financial Economics , Volume 138 - Issue 2 p. 295- 315
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.
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Braggion, F., Manconi, A., & Zhu, H. (2020). Credit and social unrest: Evidence from 1930s China. Journal of Financial Economics, 138(2), 295–315. doi:10.1016/j.jfineco.2020.05.001