Abstract

We provide microeconomic evidence on the effect of railroad infrastructure driving local shocks and shaping individuals’ opportunities. We focus on the roll-out of the railway network between 1850 and 1880 in the United-States. Building on full-count census records and linkages crosswalks, we construct multiple sets of individual-level longitudinal datasets. Precisely, we track nearly four millions of working-age white men for which we observe their occupation and county of residence. In addition, we rely on historical transportation maps to derive time-varying measures of railroad proximity and market access. Exploiting time-variation in railroad connectivity in a DiD fashion, we document substantial shifts in the local economic activities at the county-level. Our set of baseline results shows a positive effect of railroad proximity on population concentration, as a popular proxy for economic growth. Breaking-down the railroad-induced compositional effects on the sectoral and occupational structures, we document that better-connected counties experience an increase in the secondary and tertiary sectors prevalence, and a consequential rise of the frequencies of high- and semi-skilled occupations. The second part of the paper delves into individuals’ trajectories in order to decompose the aggregate effects of railroad exposure. Precisely, we examine the relative contributions of the sectoral and occupational transitions, labor market entry and geographic mobility channels. Our results suggest that railroad proximity poorly affects individuals transitioning on average, with large levels of disparities among individuals. Railroad development primarily benefits young workers and those who relocate closer to railroads, but adversely impacts labor market outcomes of older individuals who stay put. Additionally, we show that changes in railroad access deeply shape initial career choices, especially for the eldest sons. Lastly, we implement a gravity framework underscoring the role of railroads in retaining skilled jobs locally and attracting external individuals.