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The Economics of Speed: The Electrification of the Streetcar System and the Decline of Mom-and-Pop Stores in Boston, 1885–1905†

The Economics of Speed: The Electrification of the Streetcar System and the Decline of... AbstractSmall firms dominated the American economy in the nineteenth century, and they still dominate in many developing economies today. This paper tests whether geographic market segmentation due to underdeveloped intracity transportation technology precludes the emergence of large retail/wholesale stores. I exploit the natural experiment of Boston’s rapid electrification from its previous horse-drawn streetcar system, which occurred between 1889 and 1896. Analyzing newly digitized data, I find that rail-connected locations experienced a sharp decline in the share of sole proprietorships among food retail/wholesale establishments after the electrification relative to off-rail locations. Changes in market access due to streetcar electrification can explain this effect. (JEL L25, L81, L92, N71, N91, R41) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal Applied Economics American Economic Association

The Economics of Speed: The Electrification of the Streetcar System and the Decline of Mom-and-Pop Stores in Boston, 1885–1905†

American Economic Journal Applied Economics , Volume 13 (4) – Oct 1, 2021

The Economics of Speed: The Electrification of the Streetcar System and the Decline of Mom-and-Pop Stores in Boston, 1885–1905†

American Economic Journal: Applied Economics 2021, 13(4): 285–324 https://doi.org/10.1257/app.20180795 The Economics of Speed: The Electrification of the Streetcar System and the Decline of Mom-and-Pop Stores in Boston, 1885–1905 By Wei You* Small firms dominated the American economy in the nineteenth century, and they still dominate in many developing economies today. This paper tests whether geographic market segmentation due to underdeveloped intracity transportation technology pre- cludes the emergence of large retail/wholesale stores. I exploit the natural experiment of Boston’s rapid electrification from its previ- ous horse-drawn streetcar system, which occurred between 1889 and 1896. Analyzing newly digitized data, I find that rail-connected locations experienced a sharp decline in the share of sole pro- prietorships among food retail/wholesale establishments after the electrification relative to off-rail locations. Changes in mar- ket access due to streetcar electrification can explain this effect. (JEL L25, L81, L92, N71, N91, R41) efore the 1840s, “ mom-and-pop” b usinesses dominated the American economy. This type of firm was typically owned and managed by an individual or a small number of family members, produced a single product, and served a highly local- ized market. Chandler (1977) observed that the size and nature of firms in America remained relatively unchanged between 1790 and 1840, despite substantial growth of both population size and total volume of trade during this period. The increase in market size translated into a parallel increase in the number of firms, but not in the size of firms. Chandler stated that the traditional transportation technology— powered by humans, animals, wind, and water—“simply could not generate a vol- ume of output in production and number of transactions in distribution large enough to require the creation of a large managerial enterprise or to call for...
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Publisher
American Economic Association
Copyright
Copyright © 2021 © American Economic Association
ISSN
1945-7790
DOI
10.1257/app.20180795
Publisher site
See Article on Publisher Site

Abstract

AbstractSmall firms dominated the American economy in the nineteenth century, and they still dominate in many developing economies today. This paper tests whether geographic market segmentation due to underdeveloped intracity transportation technology precludes the emergence of large retail/wholesale stores. I exploit the natural experiment of Boston’s rapid electrification from its previous horse-drawn streetcar system, which occurred between 1889 and 1896. Analyzing newly digitized data, I find that rail-connected locations experienced a sharp decline in the share of sole proprietorships among food retail/wholesale establishments after the electrification relative to off-rail locations. Changes in market access due to streetcar electrification can explain this effect. (JEL L25, L81, L92, N71, N91, R41)

Journal

American Economic Journal Applied EconomicsAmerican Economic Association

Published: Oct 1, 2021

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