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Road Endpoints and City Sizes

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Document pages: 63 pages

Abstract: The completion of transportation infrastructure frequently takes many years and occurs gradually. How does the gradual construction of transportation infrastructure affect the distribution of economic activity across the sites it serves? I examine the long-run effects of the timing of railroad construction on city sizes. I first present a model that predicts that towns that are railroad endpoints for longer become persistently larger. I then show that, in a sample of Brazilian railroad towns, time as endpoint strongly predicts town size: each additional year that a town was a railroad endpoint in the past is associated with a town population 0.112 log point larger in 2010. Additional testable implications, historical evidence, and instrumental variable estimates suggest that such association reflects the causal effects predicted by the model.

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