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Portage and Path Dependence Hoyt Bleakley and Jeffrey Lin. 2012.

Portage and Path Dependence Hoyt Bleakley and Jeffrey Lin. 2012. Theresa Geyer, Economics B.Sc ., Universität Heidelberg. Portage Sites. During early settlement in North America , rivers were main transportation routes

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Portage and Path Dependence Hoyt Bleakley and Jeffrey Lin. 2012.

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  1. Portage and Path DependenceHoytBleakleyand Jeffrey Lin. 2012. Theresa Geyer, Economics B.Sc., Universität Heidelberg

  2. Portage Sites • Duringearlysettlement in North America, riversweremaintransportationroutes • Portage Sites: Places whereboats/ cargocouldbecarriedoverlandtoavoid an obstacle on thewaterway • Initial value: Completingtraderoutes  Focalpointsofcommerce in 1800s • Became obsolete due tochanges in technology

  3. Summary

  4. Paper‘scontribution • Paper tellsusbywhichmechanism obsolete naturalendowmentsareabletoexplain a currentdistributionofeconomicactivity • Disentanglingeffectsofpathdependence & naturalendowments Portage Sites

  5. The Fall Line & Areas of Analysis • Fall Line: GeomorphicalfeaturedividingPiedmontandcoastalplain many falls alongthisline

  6. Further Stepsand Background Information • Provedeclineofportage • Background information • Quantitative evidence • Data provingthatearlyportagesitesare still denselypopulated • Maps • Statistical comparisons • Responses after obsolescence • Explanation • Historical Factors • Contrasttoneoclassicalprediction • Economicmodelsofgeography

  7. 1.1 Short Historyand Background Information Transportation Infrastructure Change: canalsandlocks railroads

  8. 1.2. Quantitative Evidence: Employment Data  Portagingactivitieshavestartedtodeclinedrastically after 1880

  9. 2. Data Contemporary distributionofeconomicactivityacrossthesoutheastern United States (nighttimelights) FALL LINE Contemporary fall-linecities

  10. In General: • Population centers at thepointswhereriverscrossthe fall line. • Nopopulationcentersalongthe fall line, if a riveris not present.

  11. 2.2 Statistical Comparisons at Fall Line regression Indicators: - censustracts/ counties - averageintensityofnighttimelights

  12. Results: • a) Proximitytoportagesiteasexplanatory variable: • 10% fartherawayfrom a portagesite 6% lowerpopulationdensity in thetractdataand 2% lowerdensity in thelightsandcountydata. • b) Includingthesizeofwatershedupstream: • 10% larger upstreamwatershed 4% higherdensity at theportagesite • c) Controlling forothereffects nosignificantchanges •  correlationbetweenhistoricalportageandthecurrentdistributionofeconomicactivity • Watershedsizeaffectscurrentdensity at portagesites

  13. 4. Responses after Obsolescence • Difference-in-differenceapproachfor formal test: • First difference: portageadvantage • Second difference: 19th/20th century  Bothmethodsshow: noevidencethatportagecitiesbecamelessconcentratedas original portagingactivitiesbecame obsolete

  14. 5. ExplanationsforPersistence Decreasingreturnstoscale An increase in all inputs (labour/capital) leadsto a lessthan proportional increase in output CongestionCosts Costsresultingbecauseof negative externalitiesof high populationdensity SunkCosts

  15. 5.1 Historical Factors? • Doeshistoricaldensityofspecificfactors/ combinationoftheseat portagesitesexplainpersistence? • Possiblefactors: railroadnetwork, literacy, … • Result: Fewdifferencesbetweenportage & nonportagesitesifwecondition on present-daypopulationdensity

  16. 5.1. Contrast to Neoclassical Prediction • Contrastswithpredictionsofmodelsfeaturinglocallydecreasingreturnstoscale Portage Sites shouldhavebeen in decline

  17. 5.2 Applying a model of economic geography... … andconsideringsunkcosts • Noeffect on long-run equilibrium • Verticaldistanceshrinks • Due todecline in portageadvantage& sunkcapitaldepriciation (slows down convergence) • In the medium run: differences • In thelongrun: convergence • Onelong-run equilibrium: Intersectionof V* and V(x) • Natural advantages will not affectlong-run equilibrium • Alternatelocations will have same V curve • Differences in densitycan‘tbe persistent utility Value ofportage density

  18. ...with strong economies of scale … andconsideringsunkcosts • Sunkinvestmentscouldsolvecoordinationproblem • Verticaldistanceshrinks • Possibilityfor multiple equilibria at a site • Differences in densitycouldpersistfor a long time Increasingreturns > congestioncosts • More possiblelong-run equilibria • Natural advantagescouldaffectlong-run equilibrium • Coordinationdevice

  19. oversupplyofsunkcapital in portagesites • differences in pricesforsunkcapital CASE A Medium-run equilibrium Implications Historical sunkinvestments CASE B long-run equilibrium

  20. Results (I) • Although the advantages of the institution “portage site” became obsolete long time ago, the initial advantages still affect the current population density • pathdependencecanemergeif (i) historicaladvantagescoordinateactivityto a particularlocation (ii) returnstoscaleriseenoughtosustaindensitythere

  21. Results (II): Main EconomicMechanism obsolescence Central hypothesis: Population densitypersists in placeswith obsolete naturaladvantagesifthereare strong economiesofscalecombinedwithhistoricallysunkinvestmentswhichactas a coordinationdevice.

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