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Railroad Infrastructure Investments and Economic Development in the Antebellum United States

Author

Listed:
  • Rui M. Pereira

    (Department of Economics, The College of William and Mary)

  • William J. Hausman

    (Department of Economics, The College of William and Mary)

  • Alfredo Marvão Pereira

    (Department of Economics, The College of William and Mary)

Abstract

We measure the overall impact of railroad investment on economic development in the antebellum period in the United States using a vector autoregressive approach. Our results can be summarized as follows. First, we find bidirectional causality between railroad infrastructure investment and GDP. Second, we estimate a marginal product of $4.2 for railroad investment which corresponds to a 15.5% rate of return when considering a 10-year lifetime for railroad capital. While about two-thirds of this effect stems from the supply side, short run demand side effects also are substantial. Third, given the low effective tax rates practiced in the 1830s and the magnitude of the effects of railroad investment we estimate, it is very likely that these investments were not self-financing and may, therefore, have contributed to the high levels of public indebtedness observed in the period.

Suggested Citation

  • Rui M. Pereira & William J. Hausman & Alfredo Marvão Pereira, 2016. "Railroad Infrastructure Investments and Economic Development in the Antebellum United States," Working Papers 153, Economics Department, William & Mary.
    • Handle: RePEc:cwm:wpaper:153
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    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • N71 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: Pre-1913
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

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