Railroads and American Economic Growth: A "Market Access" Approach

Abstract

This paper examines the historical impact of railroads on the American economy. Expansion of the railroad network may have affected all counties directly or indirectly -an econometric challenge that arises in many empirical settings. However, the total impact on each county is captured by changes in that county's "market access," a reduced-form expression derived from general equilibrium trade theory. We measure counties' market access by constructing a network database of railroads and waterways and calculating lowest-cost county-to-county freight routes. As the railroad network expanded from 1870 to 1890, changes in market access were capitalized into county agricultural land values with an estimated elasticity of 1.1. County-level declines in market access associated with removing all railroads in 1890 are estimated to decrease the total value of US agricultural land by 64%. Feasible extensions to internal waterways or improvements in country roads would have mitigated 13% or 20% of the losses from removing railroads.

Regional Growth and Regional Decline

“…This second kind of decline is often a symptom of the first, but has interest in itself, as a distinct process. In the US, a country usually judged to have high labour mobility, it is perhaps not surprising that the primary response to the Dust Bowl was out-migration (Hornbeck 2012). Similarly, the Rust Belt has seen its share of the US population decline.…”

Path dependence in energy systems and economic development

“…In parallel, the expansion of an energy-related physical infrastructure has frequently been critical to the provision of abundant cheap energy 12 . Thus, there tends to be a positive feedback between energy resources, infrastructure and industrial development, locking an economy into specific consumption patterns [13][14][15] .…”

How Do Electricity Shortages Affect Industry? Evidence from India

“…Producer surplus is relevant because under our modeling assumption that output markets are perfectly competitive and there are no 33 Because the empirical estimates are identified off of relatively modest annual variation, column 2 is not a realistic estimate of the long-run effects of eliminating shortages. Online Appendix Table A21 shows very similar agreement between simulated and estimated results when comparing in terms of semi-elasticities, i.e.…”

“…Column 2 adds predictions based on the instrumental variable estimates: the predicted effects of a 7.2 percent shortage given the IV point estimates in Tables 6 and 7. 33 Column 3 presents the p-value of a test that the simulation result differs from the IV estimate.…”

“…This includes Banerjee, Duflo, and Qian (2012), Donaldson (2012), and Donaldson and Hornbeck (2013) on the effects of railroads in China, India, and the United States, Duflo (2015) is perhaps the most closely related paper to ours. They quantify the impacts of electricity shortages in the early 2000s on a sample of the largest Chinese manufacturing firms, finding that as shortages worsened, firms purchased more electricity-intensive inputs.…”