Richard Hornbeck (Chicago Booth), "Railroads, Reallocation, and the Rise of American Manufacturing"

"Railroads, Reallocation, and the Rise of American Manufacturing"

Richard Hornbeck (Chicago Booth)
Host: Nicolas Gendron-Carrier

Date: 8 November, 2019
Location: Leacock 429

Website: https://faculty.chicagobooth.edu/richard.hornbeck/

Abstract:
We examine the impacts of market integration on the development of American manu- facturing, as railroads expanded through the latter half of the 19th century. Using new county-by-industry data from the Census of Manufacturers, we estimate substantial reduced-form impacts on manufacturing productivity from relative increases in county market access as the railroad network expanded. In general equilibrium, the railroads increased economic activity in marginally productive counties. We therefore estimate substantial aggregate economic gains from the railroads, much larger than previous estimates, by allowing for the presence of factor misallocation. Our estimates high- light how broadly-used infrastructure or technologies can have much larger economic impacts when there are inefficiencies in the economy.