Road Endpoints and City Sizes

I examine the long-run effects of the timing of railroad construction on city sizes. I first present a stylized model which predicts that towns that are railroad endpoints for longer become persistently larger. I then show that, in a sample of Brazilian railroad towns, time as endpoint strongly predicts town size: each additional year that a town was a railroad endpoint in the past is associated with a town population 0.107 log points larger in 2010. Additional testable implications of the model and an instrumental variable approach suggest that such association reflects a causal effect.