Railroad Infrastructure Investments and Economic Development in the Antebellum United States

Rui Pereira, William Hausman () and Alfredo Pereira

No 153, Working Papers from Department of Economics, College of William and Mary

Abstract: We measure the overall impact of railroad investment on economic development in the antebellum period in the United States using a vector autoregressive approach. Our results can be summarized as follows. First, we find bidirectional causality between railroad infrastructure investment and GDP. Second, we estimate a marginal product of $4.2 for railroad investment which corresponds to a 15.5% rate of return when considering a 10-year lifetime for railroad capital. While about two-thirds of this effect stems from the supply side, short run demand side effects also are substantial. Third, given the low effective tax rates practiced in the 1830s and the magnitude of the effects of railroad investment we estimate, it is very likely that these investments were not self-financing and may, therefore, have contributed to the high levels of public indebtedness observed in the period.

Keywords: Railroad; Infrastructure Investments, Economic Development, Antebellum United States, Vector Auto-Regression (search for similar items in EconPapers)
JEL-codes: H54 N71 R42 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2016-04-05
New Economics Papers: this item is included in nep-gro and nep-tre
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Journal Article: Railroad Infrastructure Investments and Economic Development in the Antebellum United States (2017)
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