Lessons from 2017 Clark economics prize: Encourage more studies on Indian railways and economic history..

Niranjan Rajadhyaksha of Mint has this piece on the 2017 Clark prize given to Donald Daveson of Stanford.

One of Daveson papers is othe controversial topic: Development history of Indian railways. Those for railways say it connected India mainlands to hinterlands enabling development. Those against say railways was another source of colonial exploitation (perhaps the most successful one) where rich resources from hinterlands were brought first to ports and then shipped to London.

Daveson looks at historical data and falls in the first camp:

Donaldson’s paper “Railroads of the Raj: Estimating the Impact of Transportation Infrastructure?” (American Economic Review, forthcoming) investigates the economic benefits from building transportation infrastructure studying the case of railways in 19th century India. This paper is widely viewed as both a methodological breakthrough and substantively important paper in the field. Donaldson assembled a new and rich data set from archival sources about the expansion of railroads in India through the 19th and early twentieth century and the volume of inter-regional trade in the same period. He then uses the data to look at the effect of access to railroads on real agricultural incomes. To check that this effect does not come from building railroads where the growth was predicted to be, he uses the fact that a number of proposed lines did not get built or did not get built when they were proposed to be built. Assuming that the proposal was based on what the contemporary experts thought were the areas of greatest demand for transportation, these un-built railroads should also have an effect if they were any good at predicting growth. He finds no such effect.

Niranjan says Daveson research shows there are two lessons  from such research:

Donaldson is one of the new generation of development economists who use unique data sets to examine what happened in the past. His research on the economic impact of railways uses some innovative district-level data sets that he has constructed on prices, output, rainfall, domestic trade and international trade. These are based on digitized records of the British Raj. Davidson has also developed a digital map of the railways network. Each 20km stretch is coded with its year of opening.

His three key conclusions: railway expansion led to a fall in trading costs, it increased the volume of goods shipped and the economic benefits greatly exceeded the cost of construction.

There are two important lessons from the sort of innovative work being done by economists such as Donaldson.

First, debates about the past can be enriched if the data is carefully examined. One recent example is a paper published by three scholars on the website Ideas for India. Sriya Iyer, Anand Shrivastava and Rohit Ticku have constructed a geo-coded dataset to examine whether temple desecrations by Muslim rulers in medieval India are better explained by political dominance or religious iconoclasm.

Second, there are contemporary policy lessons as well. Railroads of the Raj: Estimating the Impact of Transportation Infrastructure, which Davidson wrote in September 2012, as well as his later work on the expansion of railways in the US, provides ample proof that ramping up investment in railways and roads is one of the best ways to promote development in the hinterland.

This lesson should be even more resonant at a time when the new goods and services tax will remove obstacles to internal trade by creating a truly integrated Indian market

The second lesson is well known and hardly worth emphasising. Though, there is one crucial difference between Railways then vs Railways now. Earlier, much of railway investment and organisation was done in private sector but now it is totally public sector. There are many political compulsions now compared to earlier times.

I would want to emphasise on the first lesson. We clearly need more funding and opportunities to both document and analyse historical data. There are many publications and data sources developed by British which give us atleast some ideas about Indian regions and differnt sectors like railways, agriculture etc. These have to be complied at one place and gradually be built into databases for analysis. But neither there is any awareness about these databases/publications nor there is any funding to unravel these sources. We could have many such research throwing rich insights into historical economics.

It is highly praiseworthy to see researchers like Donaldson showing interest in things like history of railways which hardly appeals to researchers and policymakers in India….


One Response to “Lessons from 2017 Clark economics prize: Encourage more studies on Indian railways and economic history..”

  1. Gopal Says:


    cotton, rail , economy are interlock ed
    in India for historical reasons.

    China model of connection must be studied.
    China penetrated May’s London
    Good s exchange d.
    calculate worth of in and out

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