Reading: Dave Donaldson (2016): Railroads of the Raj: Estimating the Impact of Transportation Infrastructure
Dave Donaldson (2016): Railroads of the Raj: Estimating the Impact of Transportation Infrastructure American Economic Review <http://www.nber.org/papers/w16487.pdf>
How large are the benefits of transportation infrastructure projects, and what explains these benefits? This paper uses archival data from colonial India to investigate the impact of India’s vast railroad network. Guided by four results from a general equilibrium trade model, I find that railroads: (1) decreased trade costs and interregional price gaps; (2) increased interregional and international trade; (3) increased real in- come levels; and (4), that a sufficient statistic for the effect of railroads on welfare in the model accounts for virtually all of the observed reduced-form impact of railroads on real income in the data.
The Model:
- Inter-district price differentials are trade costs
- Bilateral trade flows are well-modeled by the gravity equation
- Railroad access raises real income
- The impact of railroads is fully measured by the share of a district’s expenditure that is self-sourced
- Value of this model given that the structure of commodities and preferences are not Eaton-Kortum?
The Results:
- 16.4% gain in district real agricultural income from connection to railroad network OLS…
- Plus an entirely placebo-based estimation strategy
- Planning stages: received, proposed, reconnoitered, surveyed, sanctioned
- Viceroy Lawrence’s 1869 unbuilt six Five-Year Plans
- Major Kennedy’s 1848 low perceived railroad construction-cost proposal
- Successful at silencing Identification Taliban? Convincing? How convincing?
- Value of the theory?
