Spain's development of Rural Credit Cooperatives from 1900 to 1936: the role of financial resources and Formal Education

Abstract

This paper analyzes the role of financial resources, formal education, and other factors in explaining the presence and spread of rural credit cooperatives (RCCs) across Spanish provinces in the first third of the twentieth century. We first provide descriptive evidence on the evolution of RCCs and their financial activity. Then, we use panel data techniques to analyze the empirical validity of the potential determinants that we have collected. We find a negative correlation between the male illiteracy rate and both the presence of cooperatives and their credit activity. Additionally, we find that cooperatives and public granaries were likely to be located in the same provinces. The cooperatives located in the richest provinces were granted access to external funding and, in particular, to the funds provided by the Banco de Espan˜a (Bank of Spain). Our estimates attest that the funds obtained from their members were far more relevant than the external funds in accounting for both the number of cooperatives and their credit activity