Big Social Savings in a Small Laggard Economy: Railroad-Led Growth in Brazil

Abstract

Railroad development had a profound impact in nineteenth- and early-twentieth-century Brazil. Direct benefits were small for passengers, but large for freight services, and contributed heavily to the transition from stagnation to growth. Domestic-use activities received a differentially large stimulus. Estimates of the social rate of return reveal that Brazil did not overinvest in railroads. A different allocation of subsidies to railroad capital could have generated additional gains. Backward linkages did little for industry, but the “leakage” attributable to imported inputs was modest. Institutional externalities were mixed. By 1913 railroads had paved the way for dramatically improved economic growth.

Colonial Institutions, Slavery, Inequality, and Development: Evidence from São Paulo, Brazil

“…Their inclusion further reduces the parameter on the slavery variable, and strips it of its last remaining statistical significance. The railroad effect in particular is strong in the OLS specifications, a result consistent with finding in other frameworks (Summerhill, 2003;. The final specification removes the density variable and adds an economically more specific measure of the average productivity of land (gross farm product divided by the land in farms), which takes on the expected sign and is significant.…”

The broader economic consequences of transport infrastructure investments

“…Railroad investments in Brazil represented a purchase of specialization and enhanced productivity (Summerhill, 2005a). This impact was large for overland movements given the absence of an affordable alternative to railroads, which further attracted large inflows of labor and capital which were used in other activities that raised national income.…”

Transport costs and economic growth in a backward economy: the case of Peru, 1820-1920

“…The lower cost for using llamas is not surprising considering that llamas did not require much care, since they mostly fed upon practically all species of herbage from the mountains and were better suited than mules to the natural conditions of the Andes (Hills 1860, p. 101). 25 These figures were calculated using the freight rates reported by Coatsworth (1979) and Summerhill (2005). These differences in rates may have implied private gains for some firms that were served by the railroad and therefore paid less for transportation.…”