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Why railways fail: Colonial railways and economic development in Habsburg Bosnia–Herzegovina

Author

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  • Neubert, Magnus
  • Nikolić, Stefan

Abstract

Are railways always a harbinger of prosperity? We examine the economic effects of railways in Bosnia–Herzegovina under Habsburg colonial rule. Our novel dataset consistently tracks the non-agricultural population share of over 4500 settlements in Habsburg Bosnia in 1885, 1895, and 1910, based on census records. Applying the inconsequential units approach, with least-cost paths as our instrumental variable, we estimate the effect of railway access on occupational change. In settlements directly connected to imperial railways and competition, non-agricultural activity declined as craftsmen returned to agriculture. By contrast, the new railway network temporarily accelerated non-agricultural activity, primarily by attracting factories and foreign labor. Railway access generated more sustained non-agricultural employment growth in settlements with higher human capital and stronger law enforcement. Overall, our findings suggest that colonial railways did not uniformly promote economic development: while railway access reshaped local occupational structures, lasting positive effects depended on local development preconditions.

Suggested Citation

  • Neubert, Magnus & Nikolić, Stefan, 2026. "Why railways fail: Colonial railways and economic development in Habsburg Bosnia–Herzegovina," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 181, pages 1-17.
    • Handle: RePEc:zbw:espost:336881
    DOI: 10.1016/j.jdeveco.2026.103747
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    JEL classification:

    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • N94 - Economic History - - Regional and Urban History - - - Europe: 1913-
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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