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Railroad Development and Market Integration: The Case of Tsarist Russia

Published online by Cambridge University Press:  11 May 2010

Jacob Metzer
Jacob Metzer
Affiliation:
Hebrew University of Jerusalem
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Extract

Up until the mid-nineteenth century Russia had an enserfed peasantry, a mere 1,000 or so miles of railways, and a small, almost insignificant market sector. When serfdom was abolished (1861) and the expansion of railroads started to occupy a prominent place in development policy toward the end of the nineteenth century, Russia was launched on a transformation from a state of preindustrial and pre-capitalistic backwardness into a path of modernization and industrialization.

Type
Articles
Information
The Journal of Economic History , Volume 34 , Issue 3 , September 1974 , pp. 529 - 550
Copyright
Copyright © The Economic History Association 1974

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References

I am grateful for comments and suggestions generously provided by Robert W. Fogel, Arcadius Kahan, Don McCloskey and Nachum Gross.

1 See for example, Florinsky, Michael T., Russia: A History and an Interpretation (New York: Macmillan, 1953), p. 955Google Scholar; Goldsmith, Raymond W., “The Economic Growth of Tsarist Russia 1860–1913,” Economic Development and Cultural Change, Vol. 9 (April 1961), p. 441Google Scholar; Ellison, Herbert J., “Economic Modernization in Imperial Russia: Purposes and Achievements,” Journal Of Economic History, XXV (December 1965), 531.Google Scholar

2 Lyashchenko, Peter I., History of the National Economy of Russia, (New York: Macmillan, 1949), pp. 500, 503.Google Scholar

3 Lyashchenko, History, pp. 517–518; Bookshpan, J., “The Internal Trade of Russia” in Raffalovich, Arthur (ed.), Russia: Its Trade and Commerce (London, 1918), pp. 268–273Google Scholar; Rubinow, I. M., Russian Wheat and Wheat Flour in European Markets (Washington, D.C.: U.S.D.A. Bulletin 66, 1908), pp. 20–22Google Scholar; Ellison, “Economic Modernization,” p. 532.

4 For simplicity the graphical exposition is confined to a case of moving from a non-trade to an including-trade situation.

5 Regional production response is formulated here as a movement along a given transformation curve. Actually one would expect, in addition, outward shift of the regional transformation curves themselves, due to interregional movements of factors of production, and/or realization of scale effects.

6 In principle, creation of trade does not necessarily lead to more regional specialization. Where regional production possibilities are similar, trade would result from taste differences if it were to take place at all, and regional production would then tend to greater uniformity. This outcome, however, does not seem to be a plausible one in the context of interregional trade within one country. Tastes are probably not much different between regions, but regional production- possibilities might differ quite substantially, as was the case in Russia.

7 This approach is different from the one used by Kovalchenko and Milov in their paper “Methods of Studying the Process of the Formation of the Agricultural Commodities Market in Russia in the 18th-20th centuries” (Presented to the 5th International Congress of Economic History, Leningrad, August, 1970). They propose to view increasing correlation between regional prices as an indication of market integration. This method, however, does not seem appropriate. On the one hand, a trend in the correlation between regional prices might not be a result of changes in the market structure but rather an outcome of country-wide effects—a crop failure, for instance. On the other hand, a movement toward price equality through arbitrage might very well be reflected in declining (or negative) correlation coefficients, instead of rising ones.

8 Based on Tables 1, 2, 7, 8 in Metzer, Jacob, “Some Aspects of Railroad Development in Tsarist Russia,” unpublished Ph.D. dissertation, University of Chicago, 1972.Google Scholar

9 Tegoborski, M.L., Commentaries on the Productive Forces of Russia, (London: Longman, Brown, Green and Longman, 1855), pp. 258–262.Google Scholar

10 See Lyashchenko, History, pp. 517–518 and Pavlovsky, George, Agricultural Russia on the Eve of the Revolution, (New York: Howard Fertig, 1968), p. 24.Google Scholar

11 This, apart from the simultaneous construction of the huge Trans-Siberian railway and other lines in Central Asia.

12 The data pertaining to the annual grain prices in St. Petersburg and Odessa have been kindly provided to me by Professor Arcadius Kahan. They are contained in his yet unpublished manuscript “Russian Statistics in the 19th Century,” (Chicago, 1967, mimeo).Google Scholar

13 1 ruble = 100 kopecks; 1 pood = 36.1 pounds.

14 Pavlovsky, Agricultural Russia, p. 34.

15 The source of data is the commodity prices collection published by the Ministry of Commerce and Industry. Svod tovarnykh tsien na glavnykh russkikh i inostrannuykh (St. Petersburg: Ministerstvo torgovii i promyshiennosti, 1890–1915).Google Scholar

16 See Rubinow, I. M., Russia's Wheat Trade (Washington, D.C.: U.S.D.A. Bulletin 65, 1908), pp. 38–48.Google Scholar See also Westwood, J., A History of Russian Railways, (London: Allen and Unwin, 1964) p. 83Google Scholar; Snodgrass, J. H., Railway Rates, Inland Waterways and Canals in the Russian Empire, (Washington, D.C.: U.S.G.P.O., 1911), pp. 16–29.Google Scholar

17 Derived from Table 7, Column (1).

18 Statistically, the variances of rye prices are homogeneous at a 95 percent level of significance but the wheat price variances are heterogeneous even at 99 percent.

19 The non-market demand elasticity for rye was probably lower than that for wheat. This would tend, other things equal, to increase the market supply elasticity of the latter. But given the difference between the proportions of marketed output of the two crops (about 20 percent for rye and about 60 percent for wheat over the years 1891–1910), it seems plausible to assume that whatever the difference between the demand elasticities was, it would not be sufficient to compensate for the difference in the market shares. For example, given the above market shares, and assuming Ea = 1 for the two crops and Ēs = 0.1 for rye, it would require a producer's demand elasticity for wheat of about 5 to equalize the market supply elasticity of the two crops. Any value smaller than 5 would still leave the market supply elasticity of rye larger than that of wheat. Given a unit elasticity of producer's demand for wheat, for instance, the excess supply elasticities of rye and wheat would be 5.4 and 2.3 respectively, which means quite a substantial difference between the two.

20 This estimate is based on the average grain price differentials between St. Petersburg and Odessa, for which our data (see Table 2) cover the whole span of time from the period prior to the construction of the railroads (1956–63), to the period when complete long haul rail connection did exist between the. two regional markets (1884–1887). The differences between the annual grain prices declined by some 76 percent during this period, from about 18 kopecks per pood in the years 1856–1863 to about 4.4 kopecks in 1884–1887. Transportation cost due to the railway declined by some 63 percent (see p. 9 above) which are about 83 percent of the reduction in the price differentials.

21 From a report of the Special Commissioner of the Ministry of Finance, Counselor of State Miller. Commissioned to study the new tendencies in grain trade. Quoted by Rubinow in Russia's Wheat Trade, p. 10.