Category Archives: economic history

Dave Donaldson of Railroads of the Raj

17 Monday Apr 2017

Posted by in economic history, Infrastructure

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Dave Donaldson whose job market paper was a very interesting paper titled “Railroads of the Raj: Estimating the Impact of Transportation Infrastructure” won 2017 John Clark Bates medal given “to that American economist under the age of forty who is judged to have made the most significant contribution to economic thought and knowledge.” The winner only has to be working in the US- citizenship is not a criteria.

The link to the citation is here: https://www.aeaweb.org/about-aea/honors-awards/bates-clark/david-donaldson

The abstract for the Railroads of the Raj NBER Working paper is as follows:

“How large are the benefits of transportation infrastructure projects, and what explains these benefits? To shed new light on these questions, this paper uses archival data from colonial India to investigate the impact of India’s vast railroad network. Guided by four predictions from a general equilibrium trade model, I find that railroads: (1) decreased trade costs and interregional price gaps; (2) increased interregional and international trade; (3) increased real income levels; and (4), that a sufficient statistic for the effect of railroads on welfare in the model (an effect that is purely due to newly exploited gains from trade) accounts for virtually all of the observed reduced-form impact of railroads on real income in the data. I find no spurious effects from over 40,000 km of lines that were approved but – for four different reasons – were never built.”

Weather shocks, railroads, and openness to trade

05 Sunday Jan 2014

Posted by in diverse perspectives, economic history, Infrastructure

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It is quite interesting to see a bunch of papers written on one aspect of Indian economy from a variety of angles. Following are some such papers by Dave Donaldson of MIT. The first one was presented in the ASSA 2014 and that is what got me reading Dave’s work.

1. Can Openness to Trade Reduce Income Volatility? Evidence from Colonial India’s Famine Era

2. Weather and Death in India

3. Can Openness Mitigate the Effects of Weather Shocks? Evidence from India’s Famine Era

While we are on weather shocks, you might be interested in my earlier post on weather shocks and consumption smoothing in India and this one on general importance of rainfall shocks in post independence India.

Impact of the British Colonial Rule

02 Saturday Apr 2011

Posted by in economic history, growth, regional imbalance

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There is a lot of debate on what exactly was the impact of the British colonial rule on the Indian economy. Usually, the literature can be broadly divided into two camps. One camp is of the opinion that the British colonial rule not only affected India but also Britain, albeit in a positive way in case of the later. The other camp is on the opposite spectrum associating the failure of the Indian economy during the British period to causes like rainfall shortages and famines.

Yet another way of looking at the impact of the colonial rule is tie it to the current outcomes of different regions or countries. Lakshmi Iyer’s recent article belongs to this category. It “compares economic outcomes across areas in India that were under direct British rule with areas that were under indirect colonial rule.” She finds that areas that experienced direct rule have significantly lower levels of access to schools, health centers, and roads in the post colonial period.

 

Iyer Lakshmi, Direct versus Indirect Colonial Rule in India: Long-Term Consequences, The Review of Economics and Statistics, 92(4), November 2010, 693-713.

economics of land reforms and railway network

25 Monday Oct 2010

Posted by in economic history, politcal economy, socioeconomic perspectives

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Came across two new papers. One of them is a contribution to the growing literature on political economy of land reforms or redistribution. The other one is on the economic contribution of the huge railway network that the British built in India.

1. Bardhan, Pranab, and Dilip Mookherjee. 2010. “Determinants of Redistributive Politics: An Empirical Analysis of Land Reforms in West Bengal, India.” American Economic Review, 100(4): 1572–1600.

Abstract:

We investigate political determinants of land reform implementation in the Indian state of West Bengal. Using a village panel spanning 1974-1998, we do not find evidence supporting the hypothesis that land reforms were positively and monotonically related to control of local governments by a Left Front coalition vis-à-vis the right-centrist Congress party, combined with lack of commitment to policy platforms. Instead, the evidence is consistent with a quasi-Downsian theory stressing the role of opportunism (reelection concerns) and electoral competition. (JEL D72, O13, O17, Q15)

2.  Donaldson Dave (2010),  Railroads of the Raj: Estimating the Impact of Transportation Infrastructure, NBER Working Paper no. 16487.

Abstract:

How large are the benefits of transportation infrastructure projects, and what explains these benefits? To shed new light on these questions, this paper uses archival data from colonial India to investigate the impact of India’s vast railroad network. Guided by four predictions from a general equilibrium trade model, I find that railroads: (1) decreased trade costs and interregional price gaps; (2) increased interregional and international trade; (3) increased real income levels; and (4), that a sufficient statistic for the effect of railroads on welfare in the model (an effect that is purely due to newly exploited gains from trade) accounts for virtually all of the observed reduced-form impact of railroads on real income in the data. I find no spurious effects from over 40,000 km of lines that were approved but – for four different reasons – were never built.

 

Railroads of the Raj: Estimating the Impact of Transportation Infrastructure

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NBER Working Paper No. 16487
Issued in October 2010

Development in Historical Perspective

31 Tuesday Aug 2010

Posted by in comparative development, economic history

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Econometric exercises in cross country data are always interesting but have to be taken with a pinch of salt. There is only to a limited extent that we can control for country specific factors and differences to glean some insight on broad world level patterns.

Recently, I came across one such interesting exercise by Comin, Easterly and Gong (2010) . These authors ask an interesting question- was wealth of nations determined in 1000 BC? In other words are the inter country differences in development a result of historical (ancient) differences of some sort?

Technological improvement and adoption are one of the important determinants of nation’s growth and development. Hence, these authors ask if the historical differences in technological adoption determine the world distribution of growth levels today. It is certainly an ambitious exercise given that it starts with data from 1000BC and has to control for the massive human migrations that have happened over such long period of time. With all the caveats in place, the conclusion is definitely interesting. It is not the level of technological adoption in 1000BC that determines today’s inter-country differences but the level in 1500 AD.

According to the to the measures used in the paper, China always was a leader in technological adoption since 1000BC to 1500AD. India and Western Europe were lagging behind equally around 1000BC, seemed to have caught up around 0 AD and then Western Europe surpasses all the civilizations in 1500 AD. Currently Western Europe seems to be far ahead of China and India and this somewhat corresponds closely to the differences between these civilizations in 1500 AD than earlier periods. The regressions and robustness analysis confirm this interpretation.

There are variety of limitations one could think about while critiquing such exercise. One is that the historical data is not accurate and is subject to frequent revisions.  More research has been done on the Western Europe’s history than any other place in the world and hence there is an inherent eurocentric bias in all such data analysis and narratives. However, in spite of these limitations the analysis in this paper is pertinent and paves the way for further research in historical determinants of development today. It also widens the set of questions asked about inter-country differences in development to those beyond the differences in geography and institutions . In doing so,  it definitely underscores the importance of history’s importance in current outcomes.