The Historical Origins of Development: Railways, Agrarian Elites, and Economic Growth in Brazil

Advisor: Claudio Ferraz

This dissertation explores the impact of transportation infrastructure on economic development and the effects of agrarian elites’ political power on investments in education. The first chapter documents the impact of the Brazilian railway network on structural transformation between the late nineteenth and middle twentieth century. We exploit variation induced by geographic location, where municipalities near the least-cost routes were more likely to be connected to railway system, to identify the causal effects of railroads on structural transformation. We show that the expansion of the transportation infrastructure shifts the workers from agriculture to manufacturing. We provide evidence that market integration and the adoption of new technologies by manufacturing firms were two important mechanisms that explain the change in the occupational structure of the economy. The second chapter explores the persistence of the impact of Brazil’s railway network on long-run economic development between 1950 and 2010. We exploit variation induced by geographic location, where municipalities near the least-cost routes were more likely to be connected to railway system, to identify the causal effects of railroads on economic activity. We show that, despite the decline of the railway network post-1950s, the effect on economic development persisted. Our findings suggest that agglomeration and urbanization were key drivers of economic activity persistence. In the third chapter, we study the relationship between the political power of agrarian elites and the spread of mass schooling in the early 20th century in Brazil. We use a novel dataset on the occupational structure of the voting elites in 1905 and historical censuses to test whether places, where more voters belonged to the agriculture elite, invested less in schooling. We find that municipalities with a higher share of agriculture voters have a lower literacy rate in 1920 and these effects persist until the 1970s. In the long-run, municipalities that had a higher share of agriculture voters have fewer years of schooling and lower income per capita. We provide evidence that the supply of educational inputs is the main mechanism that explains the long-term persistence.