  In this paper, we analyze the effect of transport infrastructure investments
in railways. As a testing ground, we use data from a new historical database
that includes annual panel data on approximately 2,400 Swedish rural
geographical areas during the period 1860-1917. We use a staggered event study
design that is robust to treatment effect heterogeneity. Importantly, we find
extremely large reduced-form effects of having access to railways. For real
nonagricultural income, the cumulative treatment effect is approximately 120%
after 30 years. Equally important, we also show that our reduced-form effect is
likely to reflect growth rather than a reorganization of existing economic
activity since we find no spillover effects between treated and untreated
regions. Specifically, our results are consistent with the big push hypothesis,
which argues that simultaneous/coordinated investment, such as large
infrastructure investment in railways, can generate economic growth if there
are strong aggregate demand externalities (e.g., Murphy et al. 1989). We used
plant-level data to further corroborate this mechanism. Indeed, we find that
investments in local railways dramatically, and independent of initial
conditions, increase local industrial production and employment on the order of
100-300% across almost all industrial sectors.
