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Railroads of the Raj: Estimating the Impact of Transportation Infrastructure

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  • Dave Donaldson

Abstract

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.

Suggested Citation

  • Dave Donaldson, 2010. "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure," NBER Working Papers 16487, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16487
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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • N15 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Asia including Middle East
    • N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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