IDEAS home Printed from https://ideas.repec.org/a/zbw/espost/336881.html

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/336881/1/Neubert_2026_Why_railways_fail.pdf
    Download Restriction: no

    File URL: https://libkey.io/10.1016/j.jdeveco.2026.103747?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Dave Donaldson, 2018. "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure," American Economic Review, American Economic Association, vol. 108(4-5), pages 899-934, April.
    2. Remi Jedwab & Edward Kerby & Alexander Moradi, 2017. "History, Path Dependence and Development: Evidence from Colonial Railways, Settlers and Cities in Kenya," Economic Journal, Royal Economic Society, vol. 127(603), pages 1467-1494, August.
    3. Melissa Dell & Benjamin A Olken, 2020. "The Development Effects of the Extractive Colonial Economy: The Dutch Cultivation System in Java," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(1), pages 164-203.
    4. Jeremy Atack & Michael R. Haines & Robert A. Margo, 2008. "Railroads and the Rise of the Factory: Evidence for the United States, 1850-70," NBER Working Papers 14410, National Bureau of Economic Research, Inc.
    5. Sam Asher & Paul Novosad, 2020. "Rural Roads and Local Economic Development," American Economic Review, American Economic Association, vol. 110(3), pages 797-823, March.
    6. Max-Stephan Schulze & Nikolaus Wolf, 2009. "On the origins of border effects: insights from the Habsburg Empire," Journal of Economic Geography, Oxford University Press, vol. 9(1), pages 117-136, January.
    7. Erik Hornung, 2015. "Railroads And Growth In Prussia," Journal of the European Economic Association, European Economic Association, vol. 13(4), pages 699-736, August.
    8. Baum-Snow, Nathaniel & Henderson, J. Vernon & Turner, Matthew A. & Zhang, Qinghua & Brandt, Loren, 2020. "Does investment in national highways help or hurt hinterland city growth?," Journal of Urban Economics, Elsevier, vol. 115(C).
    9. Schulze, Max-Stephan, 2007. "Regional income dispersion and market potential in the late nineteenth century Hapsburg Empire," Economic History Working Papers 22311, London School of Economics and Political Science, Department of Economic History.
    10. Aggarwal, Shilpa, 2018. "Do rural roads create pathways out of poverty? Evidence from India," Journal of Development Economics, Elsevier, vol. 133(C), pages 375-395.
    11. repec:ehl:lserod:22311 is not listed on IDEAS
    12. Head, Keith & Mayer, Thierry, 2004. "The empirics of agglomeration and trade," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 59, pages 2609-2669, Elsevier.
    13. Berger, Thor, 2019. "Railroads and Rural Industrialization: evidence from a Historical Policy Experiment," Explorations in Economic History, Elsevier, vol. 74(C).
    14. Alfonso Herranz-Loncán & Johan Fourie, 2018. "“For the public benefit”? Railways in the British Cape Colony," European Review of Economic History, European Historical Economics Society, vol. 22(1), pages 73-100.
    15. Ha-Joon Chang, 2003. "Kicking Away the Ladder: Infant Industry Promotion in Historical Perspective 1," Oxford Development Studies, Taylor & Francis Journals, vol. 31(1), pages 21-32.
    16. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 949-995, October.
    17. Fenske, James & Kala, Namrata & Wei, Jinlin, 2023. "Railways and cities in India," Journal of Development Economics, Elsevier, vol. 161(C).
    18. Lakshmi Iyer, 2010. "Direct versus Indirect Colonial Rule in India: Long-Term Consequences," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 693-713, November.
    19. William Easterly & Ross Levine, 2016. "The European origins of economic development," Journal of Economic Growth, Springer, vol. 21(3), pages 225-257, September.
    20. Fernihough, Alan & Lyons, Ronan C., 2022. "Agglomeration and Emigration: The Economic Impact of Railways in Post-Famine Ireland," CEPR Discussion Papers 17759, C.E.P.R. Discussion Papers.
    21. repec:spo:wpmain:info:hdl:2441/10191 is not listed on IDEAS
    22. repec:spo:wpecon:info:hdl:2441/10191 is not listed on IDEAS
    23. Louis Putterman & David N. Weil, 2010. "Post-1500 Population Flows and The Long-Run Determinants of Economic Growth and Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(4), pages 1627-1682.
    24. Tang, John P., 2014. "Railroad Expansion and Industrialization: Evidence from Meiji Japan," The Journal of Economic History, Cambridge University Press, vol. 74(3), pages 863-886, September.
    25. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    26. Schulze, Max-Stephan, 2000. "Patterns of growth and stagnation in the late nineteenth century Habsburg economy," European Review of Economic History, Cambridge University Press, vol. 4(3), pages 311-340, December.
    27. Kirill Borusyak & Peter Hull, 2023. "Nonrandom Exposure to Exogenous Shocks," Econometrica, Econometric Society, vol. 91(6), pages 2155-2185, November.
    28. Head, Keith & Mayer, Thierry, 2004. "The empirics of agglomeration and trade," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 59, pages 2609-2669, Elsevier.
    29. Yamasaki, Junichi, 2025. "Railroads and technology adoption in Meiji Japan," Explorations in Economic History, Elsevier, vol. 97(C).
    30. Daron Acemoglu & Camilo García-Jimeno & James A. Robinson, 2015. "State Capacity and Economic Development: A Network Approach," American Economic Review, American Economic Association, vol. 105(8), pages 2364-2409, August.
    31. Nathaniel Baum-Snow, 2007. "Did Highways Cause Suburbanization?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 775-805.
    32. Melitz, Marc J., 2005. "When and how should infant industries be protected?," Journal of International Economics, Elsevier, vol. 66(1), pages 177-196, May.
    33. Hanlon, W.Walker & Heblich, Stephan, 2022. "History and urban economics," Regional Science and Urban Economics, Elsevier, vol. 94(C).
    34. Marein, Brian, 2022. "Colonial Roads and Regional Inequality," Journal of Urban Economics, Elsevier, vol. 131(C).
    35. John Komlos, 1983. "The Habsburg Monarchy as a Customs Union: Economic Development in Austria-Hungary in the Nineteenth Century," Books by John Komlos, Department of Economics, University of Munich, number 4, June.
    36. Banerjee, Abhijit & Duflo, Esther & Qian, Nancy, 2020. "On the road: Access to transportation infrastructure and economic growth in China," Journal of Development Economics, Elsevier, vol. 145(C).
    37. Conley, T. G., 1999. "GMM estimation with cross sectional dependence," Journal of Econometrics, Elsevier, vol. 92(1), pages 1-45, September.
    38. Schulze, Max-Stephan, 2000. "Patterns of growth and stagnation in the late nineteenth century Habsburg economy," LSE Research Online Documents on Economics 4370, London School of Economics and Political Science, LSE Library.
    39. Berger, Thor & Enflo, Kerstin, 2017. "Locomotives of local growth: The short- and long-term impact of railroads in Sweden," Journal of Urban Economics, Elsevier, vol. 98(C), pages 124-138.
    40. Ejaz Ghani & Arti Grover Goswami & William R. Kerr, 2016. "Highway to Success: The Impact of the Golden Quadrilateral Project for the Location and Performance of Indian Manufacturing," Economic Journal, Royal Economic Society, vol. 126(591), pages 317-357, March.
    41. Ciccarelli, Carlo & Magazzino, Cosimo & Marcucci, Edoardo, 2021. "Early development of Italian railways and industrial growth: A regional analysis," Research in Transportation Economics, Elsevier, vol. 88(C).
    42. Redding, Stephen J. & Turner, Matthew A., 2015. "Transportation Costs and the Spatial Organization of Economic Activity," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1339-1398, Elsevier.
    43. Besley, Timothy, 1995. "Property Rights and Investment Incentives: Theory and Evidence from Ghana," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 903-937, October.
    44. Lee, Jaymin, 1997. "The maturation and growth of infant industries: The case of Korea," World Development, Elsevier, vol. 25(8), pages 1271-1281, August.
    45. Daron Acemoglu & Simon Johnson & James A. Robinson, 2002. "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(4), pages 1231-1294.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Magnus Neubert & Stefan Nikolić, 2025. "Why railways fail: Colonial railways and economic development in Habsburg Bosnia-Herzegovina," Working Papers 0280, European Historical Economics Society (EHES).
    2. Fenske, James & Kala, Namrata & Wei, Jinlin, 2023. "Railways and cities in India," Journal of Development Economics, Elsevier, vol. 161(C).
    3. Fenske, James & Gupta, Bishnupriya & Mukhopadhyay, Anwesh, 2025. "Colonial Persistence," CAGE Online Working Paper Series 752, Competitive Advantage in the Global Economy (CAGE).
    4. Berger, Thor, 2019. "Railroads and Rural Industrialization: evidence from a Historical Policy Experiment," Explorations in Economic History, Elsevier, vol. 74(C).
    5. Bogart, Dan & You, Xuesheng & Alvarez-Palau, Eduard J. & Satchell, Max & Shaw-Taylor, Leigh, 2022. "Railways, divergence, and structural change in 19th century England and Wales," Journal of Urban Economics, Elsevier, vol. 128(C).
    6. Cucu, Florin, 2025. "Roads, internal migration and the spatial sorting of U.S. high-skill workers," Journal of Urban Economics, Elsevier, vol. 146(C).
    7. Das, Abhiman & Ghani, Ejaz & Grover, Arti & Kerr, William & Nanda, Ramana, 2024. "JUE insight: Infrastructure and Finance: Evidence from India’s GQ highway network," Journal of Urban Economics, Elsevier, vol. 142(C).
    8. He, Guojun & Xie, Yang & Zhang, Bing, 2020. "Expressways, GDP, and the environment: The case of China," Journal of Development Economics, Elsevier, vol. 145(C).
    9. Piotr Koryś & Marcin Wroński, 2025. "The Impact of Railway on the Regional Economic Development and Social Mobility in the Congress Kingdom of Poland," Working Papers 2025-07, Faculty of Economic Sciences, University of Warsaw.
    10. Yit Wey Liew & Muhammad Habibur Rahman & Audrey Kim Lan Siah, 2023. "Rail Stations To Development: Evidence From Colonial Malaya," Department of Economics Working Papers 2023_01, Durham University, Department of Economics.
    11. Bird, Julia & Straub, Stéphane, 2020. "The Brasília experiment: The heterogeneous impact of road access on spatial development in Brazil," World Development, Elsevier, vol. 127(C).
    12. Garcia-López, Miquel-Àngel & Herranz-Loncán, Alfonso & Tassinari, Filippo & Viladecans-Marsal, Elisabet, 2023. "Paving the way to modern growth: The Spanish Bourbon roads," Explorations in Economic History, Elsevier, vol. 90(C).
    13. Pushkar Maitra & William Yu, 2021. "The Long Shadow of Infrastructure Development: Long Run Effects of Railway Construction in Colonial India," Monash Economics Working Papers 2021-01, Monash University, Department of Economics.
    14. Xingjian Ding & Yumin Hu & Shilei Liu & Cong Peng & Jintao Xu & Mingzhi (Jimmy) Xu & Qinghua Zhang, 2026. "Green gains from connectivity: highway expansion and forest quality," CEP Discussion Papers dp2162, Centre for Economic Performance, LSE.
    15. Miquel-Àngel Garcia-López & Alfonso Herranz-Loncán & Filippo Tassinari & Elisabet Viladecans-Marsal, 2021. "Paving the way to modern growth. Evidence from Bourbon roads in Spain," Working Papers 0209, European Historical Economics Society (EHES).
    16. Okamoto, Chigusa & Sato, Yasuhiro, 2021. "Impacts of high-speed rail construction on land prices in urban agglomerations: Evidence from Kyushu in Japan," Journal of Asian Economics, Elsevier, vol. 76(C).
    17. Xie, Lin & Wang, Shaozhuang & Yan, Lingxiao, 2024. "Distributional effects of expressway access on rural entrepreneurial activities in China," Socio-Economic Planning Sciences, Elsevier, vol. 94(C).
    18. Yoshifumi Konishi & Akari Ono, 2024. "Do Winners Win More from Transport Megaprojects? Evidence from the Great Seto Bridge in Japan," Keio-IES Discussion Paper Series 2024-018, Institute for Economics Studies, Keio University.
    19. Laura Maravall Buckwalter, 2018. "Build it and they will come? Secondary railways and population density in French Algeria," Working Papers 18008, Economic History Society.
    20. Gertler, Paul J. & Gonzalez-Navarro, Marco & Gračner, Tadeja & Rothenberg, Alexander D., 2024. "Road maintenance and local economic development: Evidence from Indonesia’s highways," Journal of Urban Economics, Elsevier, vol. 143(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:espost:336881. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zbwkide.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.