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Railroads of the Raj: Estimating the Impact of Transportation Infrastructure

  • Dave Donaldson
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    How large are the benefits of transportation infrastructure projects, and what explains these benefits? To shed new light on these questions, this paper uses archival data from colonial India to investigate the impact of India's vast railroad network. Guided by four predictions from a general equilibrium trade model, I find that railroads: (1) decreased trade costs and interregional price gaps; (2) increased interregional and international trade; (3) increased real income levels; and (4), that a sufficient statistic for the effect of railroads on welfare in the model (an effect that is purely due to newly exploited gains from trade) accounts for virtually all of the observed reduced-form impact of railroads on real income in the data. I find no spurious effects from over 40,000 km of lines that were approved but - for four different reasons - were never built.

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    File URL: http://www.nber.org/papers/w16487.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16487.

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    Date of creation: Oct 2010
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    Publication status: published as “Railroads of the Raj: Estimating the Impact of Transportation Infrastructure”, American Economic Review, forthcoming.
    Handle: RePEc:nbr:nberwo:16487
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