Capital with a capital "C"

There is capital and then there is Capital. These are some interesting recent NBER papers on the latter.

Railroads and American Economic Growth: A "Market Access" Approach
Dave Donaldson and Richard Hornbeck

Abstract: This paper examines the historical impact of railroads on the American economy. Expansion of the railroad network and decreased trade costs may a ect all counties directly or indirectly, an econometric challenge in many empirical settings. However, the total impact on each county can be summarized by changes in that county's "marketaccess," a reduced-form expression derived from general equilibrium trade theory. We measure counties' market access by constructing a network database of railroads and waterways and calculating lowest-cost county-to-county freight routes. As the railroad network expanded from 1870 to 1890, changes in market access are capitalized in agricultural land values with an estimated elasticity of 1.5. Removing all railroads in 1890 would decrease the total value of US agricultural land by 73% and GNP by 6.3%, more than double social saving estimates (Fogel 1964). Fogel's proposed Midwestern canals would mitigate only 8% of losses from removing railroads.

ON THE ROAD: ACCESS TO TRANSPORTATION INFRASTRUCTURE AND ECONOMIC GROWTH IN CHINA
Abhijit Banerjee, Esther Duflo, Nancy Qian

This paper estimates the effect of access to transportation networks on regional economic outcomes in China over a twenty-period of rapid income growth. It addresses the problem of the endogenous placement of networks by exploiting the fact that these networks tend to connect historical cities. Our results show that proximity to transportation networks have a moderate positive causal effect on per capita GDP levels across sectors, but no effect on per capita GDP growth. We provide a simple theoretical framework with empirically testable predictions to interpret our results. We argue that our results are consistent with factor mobility playing an important role in determining the economic benefits of infrastructure development.

ENGINES OF GROWTH: FARM TRACTORS AND TWENTIETH-CENTURY U.S. ECONOMIC WELFARE
Richard H. Steckel and William J. White

The role of twentieth-century agricultural mechanization in changing the productivity, employment opportunities, and appearance of rural America has long been appreciated.  Less attention has been paid to the impact made by farm tractors, combines, and associated equipment on the standard of living of the U.S. population as a whole.  This paper demonstrates, through use of a detailed counterfactual analysis, that mechanization in the production of farm products increased GDP by more than 8.0 percent, using 1954 as a base year.  This result suggests that studying individual innovations can significantly increase our understanding of the nature of economic growth.