The effect of railroads and price responsiveness on acreage decisions in the post-Bellum period

Abstract

This study analyses the effect of farmers' price responsiveness and railroad development on acreage decisions in the late 19th century. A potential simultaneity between these determinants was mentioned in some earlier studies, but never examined. This study sheds some light on these relationships by employing a simultaneous equations model. The results show that acreage, prices and railroad mileage were jointly determined in the late nineteenth century. Furthermore, farmers were very responsive to wheat prices in their wheat acreage decisions in the eastern and northeastern regions when endogeneity effect is considered. In the western and southern regions, however, farmers were not responsive to wheat prices in their wheat acreage decisions. On the other hand, they were very responsive to corn and animal prices in their corn acreage decisions. Railroads were one important determinant that affected farmers' acreage decisions positively in every region.