Railroads and the Rise of the Factory: Evidence for the United States, 1850-70

Jeremy Atack, Michael R. Haines, Robert A. Margo

NBER Working Paper No. 14410
Issued in October 2008
NBER Program(s):   DAE

Over the course of the nineteenth century manufacturing in the United States shifted from artisan shop to factory production. At the same time United States experienced a "transportation revolution", a key component of which was the building of extensive railroad network. Using a newly created data set of manufacturing establishments linked to county level data on rail access from 1850-70, we ask whether the coming of the railroad increased establishment size in manufacturing. Difference-in-difference and instrument variable estimates suggest that the railroad had a positive effect on factory status. In other words, Adam Smith was right -- the division of labor in nineteenth century American manufacturing was limited by the extent of the market.

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