Colonial Investments and Long-Term Development in Africa: Evidence from Ghanaian Railways∗ Remi JEDWABa Alexander MORADIb a Department of Economics, George Washington University, and STICERD, London School of Economics b Department of Economics, University of Sussex This Version: October 14th, 2012 Abstract: What is the impact of colonial public investments on long-term development? We investigate this issue by looking at the impact of railway construction on economic develop- ment in Ghana. Two railway lines were built by the British to link the coast to mining areas and the hinterland city of Kumasi. Using panel data at a fine spatial level over one century (11x11 km grid cells in 1891-2000), we find a strong effect of rail connectivity on the pro- duction of cocoa, the country’s main export commodity, and development, which we proxy by population and urban growth. First, we exploit various strategies to ensure our effects are causal: we show that pre-railway transport costs were prohibitively high, we provide ev- idence that line placement was exogenous, we find no effect for a set of placebo lines, and results are robust to instrumentation and nearest neighbor matching. Second, transportation infrastructure investments had large welfare effects for Ghanaians during the colonial period. Colonization meant both extraction and development in this context. Third, railway con- struction had a persistent impact: railway cells are more developed today despite a complete displacement of rail by other means of transport. We investigate the various channels of path dependence, including demographic growth, industrialization or infrastructure investments. Keywords: Colonialism; Africa; Transportation Infrastructure; Trade JEL classification: F54; O55; O18; R4; F1 ∗Remi Jedwab, George Washington University and STICERD, London School of Economics (e-mail:
[email protected]).