Finance in the New U.S. Economy: Local Finance and Service Job Growth in the Post-Industrial Economy

Elizabeth Berger

I examine whether local bank finance facilitated the transition to a service-based economy in the United States. I identify a causal role for local finance in service job creation. I use county-level changes to alcohol laws as demand shocks to service employers across a subsample of U.S. counties. Counties with more local finance experience more service job creation. This leads to labor market transitions that reflect shifts in the broader economy. Information asymmetry and collateral constraints connect local finance to service sector employment. The findings identify a unique role for local finance in the evolution to a post-industrial service-based economy.