Did Railroads Induce or Follow Economic Growth?

Abstract

Using a newly developed geographic information system transportation database, we study the impact of gaining access to rail transportation on changes in population density and the rate of urbanization between 1850 and 1860 in the American Midwest. Differences-in-differences and instrumental variable analysis of a balanced panel of 278 counties reveals only a small positive effect of rail access on population density but a large positive impact on urbanization as measured by the fraction of people living in incorporated areas of 2,500 or more. Our estimates imply that one-half or more of the growth in urbanization in the Midwest in the late antebellum period may be attributable to the spread of the rail network.