Colonial Roads and Regional Inequality

This paper examines the effect of road-building on local economic development and regional inequality by studying the effort in the early 20th century to connect all cities and towns in Puerto Rico with roads. Using newly digitized maps, I show that expanding the transport network failed to reduce regional disparities and that areas near old Spanish roads became relatively more prosperous during the export boom that followed annexation by the United States. Instrumental variable and spatial first differences strategies indicate that early access to roads promoted local economic development. Areas that already had access to roads before US-led road-building became more densely populated, specialized more in the production of export crops, and eventually led the transition away from agricultural employment. Those areas are still more prosperous, suggesting that early access to the transport network gave rise to path dependence in the location of economic activity. However, geographical factors and earlier economic development—also likely a product of geography—played a larger role in shaping the spatial pattern of development.