Limited Liability and Manufacturing: Evidence from Homestead Exemption Laws in the 19th-century U.S.
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SeriesResearch Master Defense
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SpeakerJing Xian
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LocationOnline
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Date and time
August 29, 2022
15:00 - 16:00
This paper studies the impacts of homestead exemption laws on firms’ investment and output from 1850 to 1880 in the U.S. The state-level personal bankruptcy laws protected one’s homestead from creditors. Using state-level macro data and firm-level micro data in the 19th century, we discover that homestead exemption prompted the usage of an innovative technology steam engine, increased the amount of horsepower, stimulated investment in the labor force and raw materials, and improved output for manufacturing firms. Small firms benefited more from the positive impacts than large ones.