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Transportation and development: insights from the U.S., 1840-1860

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  • Berthold Herrendorf
  • James A. Schmitz
  • Arilton Teixeira

Abstract

We study the effects of large transportation costs on economic development. We argue that the Midwest and the Northeast of the U.S. is a natural case because starting from 1840 decent data is available showing that the two regions shared key characteristics with today’s developing countries and that transportation costs were large and then came way down. To disentangle the effects of the large reduction in transportation costs from those of other changes that happened during 1840?1860, we build a model that speaks to the distribution of people across regions and across the sectors of production. We find that the large reduction in transportation costs was a quantitatively important force behind the settlement of the Midwest and the regional specialization that concentrated agriculture in the Midwest and industry in the Northeast. Moreover, we find that it led to the convergence of the regional per capita incomes measured in current regional prices and that it increased real GDP per capita. However, the increase in real GDP per capita is considerably smaller than that resulting from the productivity growth in the nontransportation sectors.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Minneapolis in its series Staff Report with number 425.

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Date of creation: 2009
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Handle: RePEc:fip:fedmsr:425

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Keywords: Transportation ; Middle West ; Developing countries;

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References

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  1. Thomas Weiss, 1987. "The Farm Labor Force by Region, 1820-1860: Revised Estimates and Implications for Growth," NBER Working Papers 2438, National Bureau of Economic Research, Inc.
  2. Tasso Adamopoulos, 2006. "Transportation Costs, Agricultural Productivity and Cross-Country Income Differences," 2006 Meeting Papers 663, Society for Economic Dynamics.
  3. Coelho, Philip R. P. & Shepherd, James F., 1976. "Regional differences in real wages: The United States, 1851-1880," Explorations in Economic History, Elsevier, vol. 13(2), pages 203-230, April.
  4. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sectoral Level," IEHAS Discussion Papers 0803, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  5. Guillaume Vandenbroucke, 2003. "The U.S. Westward Expansion," Economie d'Avant Garde Research Reports 4, Economie d'Avant Garde, revised Apr 2004.
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Cited by:
  1. Berthold Herrendorf & Richard Rogerson & Ákos Valentinyi, 2009. "Two Perspectives on Preferences and Structural Transformation," NBER Working Papers 15416, National Bureau of Economic Research, Inc.
  2. Tombe, Trevor, 2011. "Structural change and regional convergence: the case of declining transport costs," MPRA Paper 34053, University Library of Munich, Germany.
  3. Tombe, Trevor, 2010. "Regions, frictions, and migrations in a model of structural transformation," MPRA Paper 26641, University Library of Munich, Germany.

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