Rural Infrastructure and Agricultural Market Integration in the United States: A long run perspective

In recent years, there has been an increasing focus by policymakers on rural infrastructure in the United States, including most recently tax credits to encourage investment. Previous work has documented the importance of railroad expansion for nineteenth century development, and demonstrated that policy failure led to the disintegration of agricultural markets in the interwar period, with potentially serious macroeconomic consequences. Using a database of average prices by state of seven agricultural products for the period ca. 1870-2010, we extend this analysis to the postSecond World War period. We find a striking disintegration in recent decades, as measured by price dispersion, which we attribute to decades of underinvestment, particularly in railroads. We thus provide strong support for the present policy focus on investment in rural infrastructure.