How Did the Location of Industry Respond to Falling Transport Costs in Britain Before World War I?

Abstract

This article explores the location of industry in pre-World War I Britain using a model that takes account both of factor endowment and also of New Economic Geography influences. Broadly speaking, the pattern of industrial location in this period was quite persistent and regional specialization changed little. The econometric results show that factor endowments had much stronger effects than proximity to markets, although the latter was an attraction for industries with large plant size. Overall, falling transport costs had relatively little effect on industrial location at a time when proximity to natural resources, notably coal, mattered most. he nineteenth-century British economy is often described in terms of a North-South divide. Regional specialization is usually explained in terms of endowments of coal and its attraction to the Victorian staple industries for which it was an important input because of steam power. 1 At least until the railway age, there were pronounced differences in coal prices in different localities, with the most expensive about six times the cheapest. 2 It is generally accepted that the basic pattern of industrial location was established during the canal era and not seriously disturbed by the advent of the railway. 3 Certainly, once established, industries benefited from external economies, but for mid-century, proximity to natural resources rather than to markets is the major theme in the literature. 4 At some point late in the nineteenth or early in the twentieth century a different rationale for industrial location started to emerge. Once electricity became available as an alternative source of power, industry had

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“…Krugman (1991a) states that a combination of lower transport costs, scale economies, and greater demand for manufacturing would lead to agglomeration. However, even with falling transport costs, it may be that local characteristics still prevail in determining industrial location; see Crafts and Mulatu (2006). the infrastructure and thus better integrate into the international economy.…”

Industry structure, entrepreneurship, and culture: An empirical analysis using historical coalfields

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“…with greater access to markets and customers (Crafts and Mulatu, 2006). Thus, large-scale industries might have located in regions with a spatial proximity to regions with a large customer base.…”

“…8 ** Table 5 about here ** Another drawback of the models presented above is that we use the 1891 employment share in large-scale industries instead of the share from earlier years. In 1891, the British railway system spanned the whole country and might have fostered the relocation of large-scale industries to regions with larger markets (Crafts and Mulatu, 2006;Krugman, 1991). In order to rule out this potentially confounding effect, we turn to another source of employment data which stems from the research project "The Occupational Structure of Britain c. 1379-1911" (Kitson et al, 2013.…”

Transport costs and economic growth in a backward economy: the case of Peru, 1820-1920

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