Establishment-level data are used to study capital deepening – increases in the capital-output ratio – in U. S. manufacturing from 1850 to 1880. In both nominal and real terms, the aggregate capital-output ratio rose substantially over the period. Capital deepening is shown to be especially...

Studies have shown a connection between finance and growth, but most do not consider how financial and real factors interact to put a virtuous cycle of economic development into motion. As the main transportation advance of the 19th century, railroads connected established commercial centers and...