Railroads and Trade in 19th-Century India

Abstract

In the latter half of the 19th century, India built the fifth-largest railway system in the world. At the same time, domestic and foreign trade grew rapidly. By the turn of the century, India was the largest exporter in Asia and the ninth largest in the world. The growth in railways played a critical role in that expansion of trade. This growth is highly correlated with several trade-related phenomena, including lower temporal price variability, increased market integration, and falling spatial price dispersion. Measuring the rail’s precise impact though is challenging, because many other relevant factors were changing too, at home and abroad. Trying to control for some of them seems to bring estimates of the contribution of railways to trade down to more modest levels. Additional research is needed to better understand this relationship. Fortunately, there is extensive data on railways, trade, prices, and production. More data are being discovered and assembled. Some of the estimation has become quite sophisticated. Endogeneity issues are being addressed. There has been a greater focus on controlling for other variables to demonstrate causality. Many hypotheses have yet to be tested. This is a rich area for future work.