Short Line Connector - Fall 2016 - 5


A

s our interconnectedness increases, thanks to the internet and mobile technologies, what does
it mean for the US economy? Stanford's Dave Donaldson and Chicago Booth's Richard Hornbeck analyzed an historical example of increased market connectedness: the spread of US
railroads in the 19th century. The researchers revisit this classic research context by looking at how
railroads affected market access, and how these effects spread through the country. Donaldson
and Hornbeck argue that railroad infrastructure had a greater impact than that suggested by
previous researchers, most notably the late Robert Fogel, a Nobel laureate from Chicago Booth.
Just as railroads connected distant markets and generated substantial local and aggregate
economic gains, our economy today depends on an interconnectedness that ensures that goods
and services can be delivered easily throughout the country.

. . . and increased in density, particularly throughout the midwest region of
the United States.
1890
Minneapolis

Boston

Chicago

New York

San Francisco
Saint Louis

3. Connecting markets allowed people to spread out.
Railroads encouraged population growth throughout parts of the country in which transportation of goods had depended heavily on wagons. The map shows population
growth between 1870 and 1890, with darker counties experiencing faster growth.
Change in population:

11%

28%

45%

70%

126%

331%

No data

What would have happened if all
railroads in 1890 had been
replaced with other means of
transporting farm goods?
Change in value of farmland if railroads in
1890 were replaced with:
A new system of canals
Improved county roads
A new canal system and
improved county roads

-52.4%
-47.5%
-40%

This infographic appeared in the Winter 2015 issue of Capital Ideas, a publication of the University of Chicago Booth School of Business, and was originally published in
"Railroads and American Economic Growth: A Market Access Approach" by David Donaldson and Richard Hornbeck in The Quarterly Journal of Economics. It was
reprinted with permission and has not been altered from the original version.

FALL 2016 // SHORT LINE CONNECTOR

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Table of Contents for the Digital Edition of Short Line Connector - Fall 2016

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Short Line Connector - Fall 2016 - Cover1
Short Line Connector - Fall 2016 - Cover2
Short Line Connector - Fall 2016 - No label
Short Line Connector - Fall 2016 - 2
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Short Line Connector - Fall 2016 - Cover3
Short Line Connector - Fall 2016 - Cover4
http://www.nxtbook.com/ygsreprints/ASLRRA/summer19
http://www.nxtbook.com/ygsreprints/ASLRRA/spring19
http://www.nxtbook.com/ygsreprints/ASLRRA/winter19
http://www.nxtbook.com/ygsreprints/ASLRRA/fall18
http://www.nxtbook.com/ygsreprints/ASLRRA/summer18
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http://www.nxtbook.com/ygsreprints/ASLRRA/winter18
http://www.nxtbook.com/ygsreprints/ASLRRA/fall17
http://www.nxtbook.com/ygsreprints/ASLRRA/summer17
http://www.nxtbook.com/ygsreprints/ASLRRA/FactsAndFigures
http://www.nxtbook.com/ygsreprints/ASLRRA/spring17
http://www.nxtbook.com/ygsreprints/ASLRRA/winter17
http://www.nxtbook.com/ygsreprints/ASLRRA/fall16
http://www.nxtbook.com/ygsreprints/ASLRRA/summer16
http://www.nxtbook.com/ygsreprints/ASLRRA/spring2016
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