Working Paper: NBER ID: w19213
Authors: Dave Donaldson; Richard Hornbeck
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.
Keywords: Railroads; Market Access; Economic Growth; Agricultural Land Values
JEL Codes: F1; N01; N51; N71; O1; R1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| railroad expansion (N91) | market access (L17) |
| market access (L17) | agricultural land values (Q15) |
| railroad expansion (N91) | agricultural land values (Q15) |
| removal of railroads (L92) | total value of U.S. agricultural land (Q15) |
| removal of railroads (L92) | annual economic loss (Q54) |
| alternative transportation improvements (R42) | mitigation of losses from removing railroads (R42) |