Why railways fail: Colonial railways and economic development in Habsburg Bosnia–Herzegovina

Magnus Neubert and Stefan Nikolić

EconStor Open Access Articles and Book Chapters, 2026, vol. 181, No 103747, 17 pages

Abstract: Are railways always a harbinger of prosperity? We examine the economic effects of railways in Bosnia–Herzegovina under Habsburg colonial rule. Our novel dataset consistently tracks the non-agricultural population share of over 4500 settlements in Habsburg Bosnia in 1885, 1895, and 1910, based on census records. Applying the inconsequential units approach, with least-cost paths as our instrumental variable, we estimate the effect of railway access on occupational change. In settlements directly connected to imperial railways and competition, non-agricultural activity declined as craftsmen returned to agriculture. By contrast, the new railway network temporarily accelerated non-agricultural activity, primarily by attracting factories and foreign labor. Railway access generated more sustained non-agricultural employment growth in settlements with higher human capital and stronger law enforcement. Overall, our findings suggest that colonial railways did not uniformly promote economic development: while railway access reshaped local occupational structures, lasting positive effects depended on local development preconditions.

Keywords: railways; occupational structure; Bosnia-Herzegovina; Habsburg Empire (search for similar items in EconPapers)
JEL-codes: I25 J21 N94 O18 R11 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:336881

DOI: 10.1016/j.jdeveco.2026.103747

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