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Railroads of the Raj: Estimating the Economic Impact of Transportation Infrastructure,”mimeo

By Dave Donaldson


I estimate the economic impact of the construction of colonial India’s railroad network from 1861-1930. Using newly collected district-level data on output, prices, rainfall, and intra- and international trade flows I estimate that the railroad network had the following effects: (1) Railroads caused transport costs along optimal routes (according to a network flow algorithm) to fall by 73 percent for an average shipment. (2) The lower transport costs caused by railroads significantly increased India’s interregional and international trade. (3) The responsiveness of a region’s agricultural prices to its own rainfall shocks fell sharply after it was connected to the railroad network, but its responsiveness to shocks in other regions on the railroad network rose. (4) Railroad lines raised the level of real agricultural income by 18 percent in the districts in which they were built. I find similar results using rainfall shortages in the 1877-78 agricultural year as an instrumental variable for railroad construction post-1880 (a response by the 1880 British parliament to the 1878 famine). And I find no effect in a variety of ‘placebo ’ specifications that us

Year: 2008
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