Paths that Led To Gold : Historical Roads, Trade, and Persistence

We investigate the heterogeneity in the long-run effects of two colonial roads in Brazil. These roads connected the coast to a thriving gold mining region in the highlands. The oldest of the two roads was heavily used at the beginning of the gold rush, but tax collection concerns led colonial authorities to commission the construction and favor the use of an alternative road. By the middle of the gold rush, trade flows through the newer road already vastly surpassed those through the older road. We combine georeferenced data on the colonial roads with measures of modern nightlights, population density, urbanization, and modern infrastructure. We use a difference-in-differences approach to estimate that the persistent effects of proximity to the newer colonial road are larger than the persistent effects of proximity to the older colonial road. Our results suggest that the past importance for trade of a historic road determines whether the effects of the road persist in the long run