About the talk:

The failure of the Freedman’s Savings Bank (FSB), one of the only Black-serving banking institutions in the early post-bellum South, was an economic catastrophe and one of the great episodes of racial exploitation in post-Emancipation history. Can events like these permanently alter financial preferences and behavior? To test this, we examine the impact of FSB collapse on insurance-holding, an alternative savings vehicle that was both accessible and extremely popular over the late 19th and early 20th centuries. We document a sharp and persistent increase in insurance demand in affected counties following the shock, driven disproportionately by Black customers. We also use FSB migrant flows to disentangle place-based and cohort-based effects. In so doing, we provide evidence identifying psychological and cultural scarring as a distinct mechanism underlying the shift in financial behavior induced by the bank’s collapse. Horizontal and intergenerational transmission of preferences further help explain the shock’s persistent effects on financial behavior.

About the speaker:

Vellore Arthi is an assistant professor in the Department of Economics at UCI. Her work focuses on labor, health, and economic demography, primarily in low-income settings. Her current research falls into two main threads. The first of these studies the role of internal migration as a mechanism through which individuals adjust to and propagate localized shocks. The second explores questions of maternal and child health, early-life development, and human capital formation, particularly as these relate to local environmental, public health, and labor market conditions. A more recent research agenda uses financial microdata to examine local economic activity and inequality in the US. Arthi holds a doctorate from the University of Oxford, and is a Faculty Research Fellow at the National Bureau of Economic Research (NBER), a Research Affiliate at the Center for Economic Policy Research (CEPR), and a Faculty Affiliate at the Center for Effective Global Action (CEGA). Prior to joining UC Irvine, she worked at organizations including the World Bank, United Nations Development Programme, and Deloitte Consulting.

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