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Railroads and Growth in Prussia

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Hornung,  Erik
Public Economics, MPI for Tax Law and Public Finance, Max Planck Society;

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Citation

Hornung, E. (2014). Railroads and Growth in Prussia. Journal of the European Economic Association, 13 (4), 699-736. doi:10.1111/jeea.12123.


Cite as: http://hdl.handle.net/11858/00-001M-0000-0025-6A27-F
Abstract
We study the effect of railroad access on urban population growth. Using GIS techniques, we match triennial population data for roughly 1,000 cities in 19th-century Prussia to georeferenced maps of the German railroad network. We find positive short- and long-term effects of having a station on urban growth for different periods during 1840-1871. Causal effects of (potentially endogenous) railroad access on city growth are identified using propensity score matching, instrumental variables, and fixed-effects estimation techniques. Our instrument identifies exogenous variation in railroad access by constructing straight-line corridors between nodes. Counterfactual models using pre-railroad growth yield no evidence to support the hypothesis that railroads appeared as a consequence of a previous growth spurt.