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The (Rail)road to Structural Change: Transportation Costs, Integration, and Production Specialization

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  • Walker, Sarah
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    Abstract

    The current study explores the role of economic integration in catalyzing structural change. Specifically, it addresses the question of how reductions in transportation costs affect patterns of production specialization over time. Drawing upon the New Economic Geography literature (Krugman, 1991; Krugman & Venables, 1995) and exploiting a natural experiment in the 19th century Austro-Hungarian Empire, I develop a structural model to empirically measure the effect of reduced transportation costs – through the introduction of railroads – on the concentration of manufactures production in a regional economy over time (i.e., 1841-1917). The structural estimations are supplemented by a reduced form strategy that attempts to address the inherent simultaneity bias that the structural estimates are incapable of solving.

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    Bibliographic Info

    Paper provided by Agricultural and Applied Economics Association in its series 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington with number 124614.

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    Date of creation: Jun 2012
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    Handle: RePEc:ags:aaea12:124614

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    Keywords: International Development; International Relations/Trade;

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    1. Joeri Gorter & Albert van der Horst & S. Brakman & H.F.L. Garretsen & M. Schram, 2005. "New economic geography, empirics, and regional policy," CPB Special Publication 56, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Peter K. Schott, 2003. "One Size Fits All? Heckscher-Ohlin Specialization in Global Production," American Economic Review, American Economic Association, vol. 93(3), pages 686-708, June.
    3. Redding, Stephen J & Venables, Anthony J., 2000. "Economic Geography and International Inequality," CEPR Discussion Papers 2568, C.E.P.R. Discussion Papers.
    4. Russell H. Hillberry & Edward J. Balistreri & Thomas F. Rutherford, 2007. "Structural Estimation and Solution of International Trade Models with Heterogeneous Firms," DEGIT Conference Papers c012_038, DEGIT, Dynamics, Economic Growth, and International Trade.
    5. Banerjee, Abhijit & Duflo, Esther & Qian, Nancy, 2012. "On the Road: Access to Transportation Infrastructure and Economic Growth in China," CEPR Discussion Papers 8874, C.E.P.R. Discussion Papers.
    6. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    7. Redding, Stephen J & Vera-Martin, Mercedes, 2003. "Factor Endowments and Production in European Regions," CEPR Discussion Papers 3755, C.E.P.R. Discussion Papers.
    8. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," NBER Working Papers 5098, National Bureau of Economic Research, Inc.
    9. Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2002. "New economic geography in Germany : testing the Helpman-Hanson model," HWWA Discussion Papers 172, Hamburg Institute of International Economics (HWWA).
    10. Keller, Wolfgang & Shiue, Carol Hua, 2008. "Tariffs, Trains, and Trade: The Role of Institutions versus Technology in the Expansion of Markets," CEPR Discussion Papers 6759, C.E.P.R. Discussion Papers.
    11. Sohrab Abizadeh & Manish Pandey, 2009. "Trade Openness, Structural Change and Total Factor Productivity," International Economic Journal, Taylor & Francis Journals, vol. 23(4), pages 545-559.
    12. Devarajan, Shantayanan & Lewis, Jeffrey D & Robinson, Sherman, 1993. "External Shocks, Purchasing Power Parity, and the Equilibrium Real Exchange Rate," World Bank Economic Review, World Bank Group, vol. 7(1), pages 45-63, January.
    13. repec:fth:iniesr:430 is not listed on IDEAS
    14. Leamer, Edward E. & Maul, Hugo & Rodriguez, Sergio & Schott, Peter K., 1999. "Does natural resource abundance increase Latin American income inequality?," Journal of Development Economics, Elsevier, vol. 59(1), pages 3-42, June.
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