Railroads and American Economic Growth: A "Market Access" Approach
NBER Working Paper No. 19213
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.
Document Object Identifier (DOI): 10.3386/w19213
Published: Dave Donaldson & Richard Hornbeck, 2016. "Railroads and American Economic Growth: A “Market Access” Approach," The Quarterly Journal of Economics, vol 131(2), pages 799-858. citation courtesy of
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