Railroads, Reallocation, and the Rise of American Manufacturing

76 Pages Posted: 31 Dec 2019 Last revised: 1 Mar 2021

See all articles by Richard Hornbeck

Richard Hornbeck

University of Chicago - Booth School of Business

Martin Rotemberg

New York University (NYU)

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Date Written: December 2019

Abstract

We examine impacts of market integration on the development of American manufacturing, as railroads expanded through the latter half of the 19th century. Using new county-by-industry data from the Census of Manufactures, we estimate substantial impacts on manufacturing productivity from relative increases in county market access as railroads expanded. In particular, the railroads increased economic activity in marginally productive counties. Allowing for the presence of factor misallocation generates much larger aggregate economic gains from the railroads than previous estimates. Our estimates highlight how broadly-used infrastructure or technologies can have much larger economic impacts when there are inefficiencies in the economy.

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Suggested Citation

Hornbeck, Richard and Rotemberg, Martin, Railroads, Reallocation, and the Rise of American Manufacturing (December 2019). NBER Working Paper No. w26594, Available at SSRN: https://ssrn.com/abstract=3511304

Richard Hornbeck (Contact Author)

University of Chicago - Booth School of Business ( email )

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Martin Rotemberg

New York University (NYU) ( email )

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