Does America Really Need More Infrastructure? Lessons from the Debate About the Role of the Railroads in the Development of the American West (original) (raw)
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This paper compares and contrasts two debates about the role of transportation in the American economy. The contemporary policy debate revolves around adequacy of current transportation infrastructure, whether infrastructure investment should be increased, and how and whether congestion should be addressed by public policy. An earlier debate in the economic history field revolved around whether the rail-roads were indispensable to America’s economic growth and how the building of a rail network affected the shape of that growth. This paper argues that in certain ways the contemporary policy exchange is covering much of the same ground covered by analysts studying the railroads and that the former can be usefully informed by the latter.
Railroad Infrastructure Investments and Economic Development in the Antebellum United States
Journal of Economic Development
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.
Railroads and Economic Growth in the Antebellum United States
2015
We measure the overall impact of railroad investment on economic growth in the antebellum period in the United States using a bivariate dynamic time series methodological approach, based on the use of a vector autoregressive (VAR) model. We find bidirectional causality between railroad infrastructure investment and GDP. Our estimates suggest that railroad investment had a substantial impact on economic growth in the antebellum United States. The elasticity of output with respect to railroad investment is 0.048 with a corresponding marginal product of 4.2. The marginal product figure indicates that one dollar invested in railroads yields a $4.2 accumulated increase in GDP over the long-term. This corresponds to a 7.5% rate of return when considering a 20-year lifetime for railroad capital. While the bulk of the estimated effect of railroad infrastructure investment, nearly two thirds of the total, stems from supply side effects, the short run demand side effects of these investments are substantial.
M P RA The Determinants of Economic Growth: The Role of Infrastructure
The main objectives of the study were to examine the effect of infrastructure (i.e. railway network) on economic growth and to examine the direction of causality between economic growth and infrastructure using historical data covering the period of 1980 to 2016 and cointegration analysis. The findings from the study revealed a positive and significant effect of infrastructure on economic growth in the long-run however, the effect of infrastructure on economic growth was not significant in the short-run analysis. Also, the test of causality found a unidirectional causality running from economic growth to infrastructure. To increase economic growth in the United States, this study recommends that both the Federal and the State Government should increase its investments in infrastructure spending especially in railways.
Railroads and Local Economic Development: The United States in the 1850s
2006
We use county and individual-level data from 1850 and 1860 to examine the economic impact of gaining access to a railroad. Previous studies have found that rail access was positively correlated with the value of agricultural land at a point in time, and have interpreted this correlation as evidence that rail access chiefly benefitted agricultural land owners in the manner predicted by the Hekscher-Ohlin or Von Theunen models. We use a difference-in-difference strategy, comparing changes in outcomes in counties that gained rail access in the 1850s to those that either gained access earlier or did not have access before the Civil War.
INFRASTRUCTURE AND ECONOMIC GROWTH
The article sheds light on the theoretical base of infrastructure, how it has developed to be one of the important research fields. Nevertheless, the tangled manifold influence of infrastructure on the economy needs to be specified. The main questions that the article addresses are: What is infrastructure? How it impacts the economy? Is there confident empirical evidence on this impact?
Infrastructure and economic growth: Evidence from the United States
Journal of infrastructure, policy and development, 2022
Developing countries have witnessed a rise in infrastructure spending over the past decades; however, infrastructure spending in most developed countries, particularly the US, continues to decline. As a result, in 2021, the US Congress passed a Bipartisan Infrastructure Bill, which invests $1 trillion in the country's infrastructure every year. Using the principal component analysis and VAR estimation, we analyzed the impact of infrastructure (transportation and water, railway networks, aviation, energy, and fixed telephone lines) on economic growth in the US. Our findings show that infrastructure spending positively and significantly impacted economic growth. Additionally, the impulse response analysis shows that shocks to infrastructure spending had positive and persistent effects on economic growth. Our results suggest that infrastructure investment spurs economic growth. Based on our findings, sustained public spending on transport and water, railway networks, aviation, energy, and fixed telephone lines infrastructure by the US government will positively impact economic growth in the country. The study also suggests that policies that promote infrastructure spending, such as the Bipartisan Infrastructure Law (Infrastructure Investment and Jobs Act) passed by the US Congress, should be enhanced to boost economic growth in the US.
2010
For generations of scholars and observers, the "transportation revolution," especially the railroad, has loomed large as a dominant factor in the settlement and development of the United States in the nineteenth century. There has, however, been considerable debate as to whether transportation improvements led economic development or simply followed. Using a newly developed GIS transportation database we examine this issue in the context of the American Midwest, focusing on two indicators of broader economic change, population density and the fraction of population living in urban areas. Our difference in differences estimates (supported by IV robustness checks) strongly suggest that the coming of the railroad had little or no impact upon population densities just as Albert Fishlow concluded some 40 years ago. BUT, our results also imply that the railroad was the "cause" of midwestern urbanization, accounting for more than half of the increase in the fraction of population living in urban areas during the 1850s.
Journal of Transport and Land Use, 2011
During the 1850s, the amount of farmland in the United States increased by 40 million hectares (100 million acres), or more than one-third. Moreover, almost 20 million hectares, an area almost equal to that of the states of Indiana and Ohio combined, were converted from their raw, natural state into productive farmland. e time and expense of transforming this land into a productive agricultural resource represented a signi cant fraction of domestic capital formation at the time and was an important contributor to American economic growth. Even more impressive, however, was the fact that almost half of these total net additions to cropland occurred in just seven Midwestern states, which constituted somewhat less than one-eighth of the land area of the country at that time. Using a new GIS-based transportation database linked to county-level census data, we estimate that at least a quarter (and possibly two-thirds or more) of this increase in cultivable land can be linked directly to the coming of the railroad to the Midwest. Farmers responded to the shrinking transportation wedge, which raised agricultural revenue productivity, by rapidly expanding the area under cultivation and these changes, in turn, drove an increase in farm and land values.
Infrastructure in a structural model of economic growth
Regional Science and Urban Economics, 1994
Researchers, commentators, and politicians have devoted steadily more attention to infrastructure in response to claims that inadequate accumulation of public capital has contributed to substandard US economic growth. Despite this, the link between infrastructure and productivity growth remains controversial. In this regard, it is somewhat surprising that infrastructure research has developed in isolation from the large literature on economic growth. We develop a neoclassical growth model that explicitly incorporates infrastructure and is designed to provide a tractable framework within which to analyze the empirical importance of public capital accumulation to productivity growth. We find little support for claims of a dramatic productivity boost from increased infrastructure outlays. In a specification designed to provide an upper bound for the influence of infrastructure, we estimate that raising the rate of infrastructure investment would have had a negligible impact on annual productivity growth between 1971 and 1986.