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The First U.S. Transcontinental Railroad: Expected Profits and Government Intervention

Published online by Cambridge University Press:  13 March 2013

Xavier Duran
Xavier Duran*
Affiliation:
Assistant Professor, School of Management, University of the Andes, Calle 21 No. 1-20 Bogota, Colombia. E-mail: [email protected].
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Abstract

Construction of the first transcontinental railroad, financed with large federal subsidies, is an important event in American history. Were the subsidies necessary to induce private investment in the railroad? The ex-ante investment decision examined uses contemporary reports and a simulation model to show that investors expected the railroad to be profitable. Evidence also shows that the railroad created political conflicts in Congress between the North and South. The secession removed the South as a disputant in Congress, reducing short-term political conflict but not long-term conflict. Subsidies reduced political risk, rather than transport market failure, and encouraged private investment.

Type
Articles
Information
The Journal of Economic History , Volume 73 , Issue 1 , March 2013 , pp. 177 - 200
Copyright
Copyright © The Economic History Association 2013

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