What is the impact of colonial infrastructure investments on long-term development? We investigate this issue by looking at the effects of railroad construction on economic development in Ghana. Two railroad 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 strong effects of rail connectivity on the production 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-railroad transport costs were prohibitively high, we provide evidence that line placement was exogenous, we find no effect for a set of placebo lines, and results are robust to instrumentation and 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, colonial railroads had a persistent impact: railroad cells are more developed today despite a complete displacement of rail by other transportation means. Physical capital accumulation and the demographic transition account for path dependence. Colonial railroads thus shaped the economic geography of Ghana.