Railroads, Technology Adoption, and Modern Economic Development: Evidence from Japan

100 Pages Posted: 2 May 2017

See all articles by Junichi Yamasaki

Junichi Yamasaki

London School of Economics & Political Science (LSE) - Department of Economics

Date Written: April 27, 2017

Abstract

Railroad access can accelerate the technological progress in the industrial sector and therefore induce structural change and urbanization, the two common features of modern economic growth. I examine this particular mechanism in the context of Japanese railroad network expansion and modern economic growth in the late 19th century and early 20th centuries. By digitizing a novel data set that measures the use of steam engines at the factory level, allowing me to directly observe the diffusion of steam power, I analyze the effect of railroad access on the adoption of steam power. To overcome the endogeneity problem, I determine the cost-minimizing path between destinations, and use this to construct an instrument for railroad access. I find that railroad access led to an increased adoption of steam power by factories, which in turn reallocated labor from the agricultural to the industrial sector, thereby inducing structural change. Railroad network also broke mean reversion in population growth, eventually leading to urbanization. My results support the view that railroad network construction was key to the modern economic growth in pre-First World War Japan.

Keywords: Railroads, Transportation Infrastructure, Technology Adoption, General Purpose Technology, Structural Change, Urbanization

JEL Classification: N65, N75, O14, O18, O33

Suggested Citation

Yamasaki, Junichi, Railroads, Technology Adoption, and Modern Economic Development: Evidence from Japan (April 27, 2017). ISER Discussion Paper No. 1000, Available at SSRN: https://ssrn.com/abstract=2961609 or http://dx.doi.org/10.2139/ssrn.2961609

Junichi Yamasaki (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

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