Railways and Price Convergence in British India
53 Pages Posted: 1 Aug 2009
Date Written: July 31, 2009
The period 1861 to 1920 witnessed sharp price convergence in British Indian grain markets. Previous research attributed this to the construction of railways. But tests examining price differences between districts provide surprisingly weak support for that hypothesis. Railways mattered, but seem capable of explaining only about 20% of the decline in price dispersion. One explanation may be that India was a partially integrated economy at the time of railroad expansion. Lines connecting districts on pre-existing trade routes had very small price effects. There is also some evidence of a “border effect” on lines between British India and princely states.
Keywords: Railways, price, convergence, India
JEL Classification: N55, N75
Suggested Citation: Suggested Citation