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

Author

Listed:
  • Magnus Neubert

    (Leibniz Institute of Agricultural Development in Transition Economies and Martin-Luther-Universität Halle-Wittenberg)

  • Stefan Nikolić

    (Loughborough University)

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-agrarian population share of over 4,500 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 structural transformation. Normal-gauge railways deindustrialized Bosnian settlements by exposing local crafts to imperial competition. Narrow-gauge railways accelerated structural transformation temporarily, primarily by attracting foreigners. Narrow-gauge railways had a more sustained impact on structural transformation in settlements endowed with human capital and secured by law enforcement. Our findings suggest colonial railways are no silver bullet for economic development; transport infrastructure requires development prerequisites to have a lasting positive effect.

Suggested Citation

  • 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).
    • Handle: RePEc:hes:wpaper:0280
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    References listed on IDEAS

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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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