Railroads, specialization, and population growth: evidence from the first globalization
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Railroads, specialization, and population growth: evidence from the first globalization ´ Forero1 · Francisco A. Gallego1 Andres
´ 1 · Mat´ıas Tapia2 · Felipe Gonzalez
Received: 12 November 2019 / Accepted: 9 September 2020 / © Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract We explore how railroads affected population growth during the first globalization (1865–1920) in Chile. We look at areas with a strong comparative advantage in agriculture using novel data that document 60 years of railroad construction. Using instrumental variables, we present four main findings. First, railroads increased both urban and rural population growth. Second, the impact was stronger in areas with more potential for agricultural expansion. Third, railroads increased specialization in agriculture when combined with a high level of the real exchange rate. And fourth, railroads had little effect on human capital and fertility. These results suggest that the effects of transportation technologies depend on existing macroeconomic conditions. Keywords Railroads · Specialization · Agriculture · Population JEL Classification F14 · N16 · N76 · O1 · R1 · R4
1 Introduction Transportation technologies are one of the main drivers of lower transportation costs and increased trade in the last centuries (Hummels 2007). Countries and global
Responsible editor: Oded Galor Francisco A. Gallego
[email protected] Felipe Gonz´alez [email protected] Mat´ıas Tapia [email protected] 1
Pontificia Universidad Cat´olica de Chile, Instituto de Econom´ıa, Santiago, Chile
2
Banco Central de Chile, Santiago, Chile
A. Forero et al.
institutions still invest an impressive amount of resources in these technologies (World Bank 2007; Faber 2012; Donaldson 2018). Railroads have historically been one of the most important transportation technologies.1 However, the availability of railroads can be the consequence of other economic outcomes, making it hard to estimate their causal effects.2 Moreover, their impacts might depend on economic factors and prevailing institutions. For instance, decreases in transportation costs might not have significant effects on trade if the cost of production is high relative to the price of the product. Similarly, although railroads have the potential to create demographic transitions or structural transformations, the comparative advantage of places might preclude these processes from unfolding (Galor and Mountford 2008; Katz 2018; Uribe-Castro 2019). This paper explores the effect of railroads during the first globalization in the central and southern parts of Chile, a small open economy with a strong comparative advantage in agriculture. In particular, we provide estimates of the causal impact of railroads on population growth, its composition, specialization patterns, human capital, and fertility. We created a panel of departments observed during the period 1865 to 1920 to measure the construction of railroads that connected the capital with other cities in the central and southern parts of the country. The ge
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