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The contribution of railways to economic growth in Latin America before 1914: a growth accounting approach

  • Herranz-Loncan, Alfonso

Railways are usually considered as one of the most important innovations that fostered the transition of Latin America to economic growth before 1914. The social saving estimates that are available for several Latin American countries seem to confirm that view. However, the interpretation of the results of the social saving literature is not straightforward, since the comparison among social savings calculated for different countries and years may be troublesome, and the actual meaning of the social saving estimates is not clear. This paper suggests an alternative approach to the economic impact of railways in Latin America. It presents estimates of the direct growth contribution of the railway technology in Argentina, Brazil, Mexico and Uruguay before 1914, which are calculated on the basis of the growth accounting methodology. The outcomes of the estimation indicate that railway effects on Uruguayan economic growth were very low. By contrast, in the other three cases under study (Argentina, Mexico and Brazil) the railways provided huge direct benefits. In Argentina and Mexico, these amounted to between one fifth and one quarter of the total income per capita growth of the period under analysis. By contrast, in the case of Brazil, the outcomes of the analysis indicate that the direct contribution of railways to growth would have been higher than the whole income per capita growth of the Brazilian economy before 1914. This unexpected result might suggest that the national level is not the most adequate scale to analyse the economic impact of network infrastructure in the case of large, geographically unequal and insufficiently integrated developing economies.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33578.

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Date of creation: 2011
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Handle: RePEc:pra:mprapa:33578
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  1. Tim Leunig, 2010. "Social Savings," Journal of Economic Surveys, Wiley Blackwell, vol. 24(5), pages 775-800, December.
  2. Stephen D. Oliner & Daniel E. Sichel, 2002. "Information technology and productivity: where are we now and where are we going?," Finance and Economics Discussion Series 2002-29, Board of Governors of the Federal Reserve System (U.S.).
  3. Nicholas Crafts, 2003. "Steam as a general purpose technology: a growth accounting perspective," Economic History Working Papers 22354, London School of Economics and Political Science, Department of Economic History.
  4. Hausman, J.A., 1994. "Valuation of New Goods Under Perfect and Imperfect Competition," Working papers 94-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. Herranz-Lonc n, Alfonso, 2006. "Railroad Impact in Backward Economies: Spain, 1850 1913," The Journal of Economic History, Cambridge University Press, vol. 66(04), pages 853-881, December.
  6. Ramírez, María Teresa, 2001. "Los ferrocarriles y su impacto sobre la economía colombiana," Revista de Historia Económica, Cambridge University Press, vol. 19(01), pages 81-122, March.
  7. Dobado, Rafael & Marrero, Gustavo A., 2005. "Corn Market Integration in Porfirian Mexico," The Journal of Economic History, Cambridge University Press, vol. 65(01), pages 103-128, March.
  8. Crafts, Nicholas, 2010. "The Contribution of New Technology to Economic Growth: Lessons from Economic History," CAGE Online Working Paper Series 01, Competitive Advantage in the Global Economy (CAGE).
  9. Metzer, Jacob, 1984. "Railroads and the Efficiency of Internal Markets: Some Conceptual and Practical Considerations," Economic Development and Cultural Change, University of Chicago Press, vol. 33(1), pages 61-70, October.
  10. Fogel, Robert William, 1979. "Notes on the Social Saving Controversy," The Journal of Economic History, Cambridge University Press, vol. 39(01), pages 1-54, March.
  11. Coatsworth, John H., 1979. "Indispensable Railroads in a Backward Economy: The Case of Mexico," The Journal of Economic History, Cambridge University Press, vol. 39(04), pages 939-960, December.
  12. Metzer, Jacob, 1973. "Some Economic Aspects of Railroad Development in Tsarist Russia," The Journal of Economic History, Cambridge University Press, vol. 33(01), pages 314-316, March.
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