Railroads and the Territorial Expansion of the State in Argentina


What effect do transportation infrastructure projects have on fiscal state capacity? Existing literature shows that transportation infrastructure is associated with greater migration, trade, economic growth, land value and inequality, but its effects on other dimensions of state capacity remain poorly explored. In this paper, we investigate the relationship between expansions of railroad networks and local fiscal and administrative state capacity. We argue that the expansion of railroad networks can lead locally ruling elites to invest in fiscal capacity if it helps them secure their local political control. To test this hypothesis, we construct a novel fine-grained dataset of municipal public finance from original archival sources in Argentina between 1870 and 1900. Exploiting the progressive expansion of the railroad network over time and employing a difference-in-differences research design, we find that tax revenues increased in municipalities that receive new railroad lines. We then discuss potential mechanisms that might drive this effect and argue that political calculations play a relevant role. Our paper helps advance the literature on state capacity by exploring the dynamics. In addition to advancing our understanding of the strategies of economic elites vis-à-vis the state, this work contributes to the literature on state building by shedding light on the interactions in the development of different dimensions of state capacity.

Work in Progress