Railroad Impact in Backward Economies: Spain, 1850–1913

Alfonso Herranz-Loncán
2006 Journal of Economic History  
This article reassesses the economic impact of Spanish railroads in 1850-1913, which has been usually considered to be substantially higher than in the most developed countries on the basis of the social saving methodology. The application of growth accounting techniques shows, by contrast, that the direct contribution of railroads to economic growth was lower in Spain than in the UK, mainly due to the low importance that railroad transport had within Spanish GDP before 1913. Railroads
more » ... Railroads constituted one of the most important technological breakthroughs of the nineteenth century, leading to a substantial upward shift in national economies' production functions worldwide. Attempts to measure their growth impact have given rise to one of the most famous debates in economic history, one of whose conclusions is the idea that their role was especially crucial in those countries which lacked an extensive system of waterways by the beginning of the railroad era, and/or whose geography put serious constraints on the development of water transport. 1 The main empirical support of this hypothesis has come from the estimation of the social savings of railroads in different countries. The social saving technique, which was pioneered by Robert Fogel's research on the US case, aims at estimating the additional cost of transporting the railroad output of one year by the next best alternative means. This additional cost, which is usually expressed as a percentage of each country's gross domestic product, would be equivalent to the resource savings provided by the railroads to the economy, under the assumptions of a priceinelastic transport demand and absence of idle resources. 2 As may be observed in Table 1 , the first social saving estimates, which were produced for highly developed countries, such as the US or the UK, were rather small, because those economies had a relatively large endowment of waterways or good possibilities to resort to coastal trade by the beginning of the railroad era and, therefore, low prospects to reduce transport unit costs through the use of railroads. By contrast, when the same methodology was applied to less developed economies with fewer possibilities to resort to cheap water transport, such as Spain in Europe, or Mexico, Brazil and Argentina in the Americas, the ratios between each country's social savings and GDP turned out to be much higher. The main alleged reason for that situation was the prominence that roads
doi:10.1017/s0022050706000350 fatcat:pusf7dkkcnfknisoh3xxnhav4q