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The Profitability of Early Canadian Railroads: Evidence from the Grand Trunk and Great Western Railway Companies Spring 1991


  • Ann Carlos
  • Frank Lewis


This paper addresses whether government subsidies to two Canadian railroads built in the 1850s - the Grand Trunk and the Great Western - made economic sense. The historical literature suggests that these railroads, although privately unprofitable, were socially profitable. Through a careful study of company records, we find that the Great Western was socially profitable and that a relatively small additional subsidy would also have made it privately profitable. But the Grand Trunk was privately unprofitable and probably socially unprofitable as well. The form of the subsidy offered the railroads - loan guarantees - and the consequences, have a depressingly up-to-date ring. While the Great Western received small amounts of limited guarantees, the Grand Trunk received considerable aid. The Grand Trunk was then encouraged to issue large amounts of heavily discounted debt, which contributed to its eventual failure.

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  • Ann Carlos & Frank Lewis, 1991. "The Profitability of Early Canadian Railroads: Evidence from the Grand Trunk and Great Western Railway Companies Spring 1991," Working Papers 814, Queen's University, Department of Economics.
  • Handle: RePEc:qed:wpaper:814

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    References listed on IDEAS

    1. William D. Nordhaus & James Tobin, 1973. "Is Growth Obsolete?," NBER Chapters,in: The Measurement of Economic and Social Performance, pages 509-564 National Bureau of Economic Research, Inc.
      • William D. Nordhaus & James Tobin, 1972. "Is Growth Obsolete?," NBER Chapters,in: Economic Research: Retrospect and Prospect, Volume 5, Economic Growth, pages 1-80 National Bureau of Economic Research, Inc.
    2. Rudolf R. Rhomberg, 1964. "A Model of the Canadian Economy Under Fixed and Fluctuating Exchange Rates," Journal of Political Economy, University of Chicago Press, vol. 72, pages 1-1.
    3. Lawrence R. Klein, 1958. "The Measurement of Capacity," Cowles Foundation Discussion Papers 49, Cowles Foundation for Research in Economics, Yale University.
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