Religion, Social Capital, and Business Bankruptcy in the United States, 1921-1932

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We consider the value of social capital that derives from membership in a church. American states with larger churchgoing populations had lower business bankruptcy rates from 1921 to 1932, and states in which the churchgoing population was concentrated in few churches had business bankruptcy rates that were lower still. Both voluntary and involuntary bankruptcy were lower in states with higher church membership. The evidence suggests that church membership acted on bankruptcy through a safety net mechanism and not solely through indicating a preference for honoring commitment.


This document is part of the working paper series from the Department of Economics at American University. It is openly available on the web.

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Copyright © 2008 by Bradley A. Hansen and Mary Eschelbach Hansen. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies.