Monopoly and Regulation in Industrializing England: Evidence from the Infrastructure Sector

Abstract

The infrastructure sector poses a challenge to the view that England had open and competitive markets during its industrializing era. The British national government granted thousands of infrastructure monopolies with rights to levy tolls in the 1700s and early 1800s. This paper shows, however, that most infrastructure providers did not earn monopoly profits. Rates of return to investors were about the same as the yield on long-term government bonds. A highly fragmented market structure was a key reason. Herfindahl measures indicate substantial fragmentation in the market for toll roads. Moreover, a lower level of concentration is shown to cause lower rates of return across English counties. Market fragmentation is linked with a regulatory framework that imposed low barriers to entry in the infrastructure sector.

Keywords: Rent-Seeking, Regulation, Turnpike roads, Britain, Industrial Revolution

JEL Classification: K23, N43, N73