Railway’s Effects on Economic Development: A Quantitative Study on Modern Henan (1890s-1930s)

Gao Shuang
Zhengzhou Shengda University of Economics, Business & Management , Zhengzhou, China  
Abstract: Different arguments on the relationship between railway construction and  
economic development exist in literature. As the railway construction of Henan in the period  
of late Qing Dynasty (1644-1911) and early Republic of China (1912-1949) provides a nearly  
natural experiment to throw new light on this topic, this paper creates county-level panel data  
for this period and conducts a further test with a difference-in-difference strategy. While the  
effect of railway is demonstrated to be positive in some literature yet negative in others, this  
paper identifies some major intergroup differences: railway lines put into service after the  
1910s and connecting central cities promoted population growth in regions along the railway  
lines, enhanced their capacity to cope with external market shocks, yet they did not improve  
integration with the intra-provincial market. By contrast, the railway lines put into operation  
in the 1930s and connecting hinterland areas not only improved regional market integration  
but contributed to higher living standards as well. The implication is that the effects of  
railway are subject to the economic relations of various localities along the railway lines  
and the economic attributes of various sectors. thus railways cannot be generally defined to  
be positive or negative. This conclusion helps explain the disagreements in empirical studies  
and highlight the impact of railways on the regional economic structure.  
Keywords: late Qing Dynasty and early Republican Period, railway, population density,  
market integration, welfare level  
JEL Classification Codes: N75, P23, O18, R11
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