Transportation infrastructure and economic growth in a dissolving country: (Ir)relevance of railroads in the Ottoman Empire

Abstract

ABSTRACT In the nineteenth century, railroads brought a substantial shift in trade and production worldwide. While this motivated underdeveloped economies to massively invest in this transportation technology, the literature on the impact of railroads includes mixed findings from a historical perspective. Using a new dataset on the population of judicial districts and railroads in the Ottoman Empire between 1881 and 1914, we examine the relationship between railroad access and economic growth in the local economies of a developing and little-known country on the eve of the First World War. Our empirical results confirm the population size expansion in the areas affected by railroads. This impact could be connected with economic growth in the Ottoman Empire, leading to higher employment opportunities and fertility rates, based on the arguments of historical research. To deal with endogeneity problems, we use an instrumental variable (IV) strategy. Our 2SLS results also indicate the presence of causality from access to railroads to population growth. The paper contributes to the previous literature by offering new empirical insights on the long debated topic about how transformation of transport networks induced economic growth in an agricultural economy facing drastic changes during the first globalization boom.