Growth Off the Rails: Aggregate Productivity Growth in Distorted Economies

Abstract

We examine impacts on aggregate productivity growth in the United States, as the railroad network expanded in the 19th century. Using data from the Census of Manufactures, we estimate relative increases in county aggregate productivity from relative increases in county market access. In general equilibrium, we find that the railroads substantially increased national aggregate productivity. By accounting for input distortions, we estimate much larger aggregate economic gains from the railroads than previous estimates. Our estimates highlight how broadly-used infrastructure or technologies can have much larger economic impacts when there are inefficiencies in the economy.