We return to two questions concerning the 19th century U.S.
transportation revolution. First, to what extent were
transportation improvements responsible for the large changes in
the regional distribution of population in the United States
and, within regions, for the changes in industry structure?
Second, how important were transportation improvements for
welfare gains? We find that transport improvements were the key
factor driving where people lived and what industry they worked
in. We also find that transport improvements were important for
welfare gains: Gains over 1840-1860 would have been only half as
large if there had been no transportation improvements. From a
new International Economic Review article by Berthold
Herrendorf, James A. Schmitz, Jr., and Arilton Teixeira. The
emphasis is mine and, quite frankly, I’m surprised that the
effect of transportation improvements on welfare is not larger.
Better transportation decreases transaction costs, which means
that for many goods and services, buyers pa