Railways, Development and Literacy in India

We study the effect of railroads, the single largest public investment in colonial India, on human capital. Using district-level data on literacy and two different identification strategies, we find railroads had positive effects on literacy, in particular on male and English literacy. We show that railroads increased literacy by raising secondary and elite primary schooling, rather than vernacular primary schooling. Our mediation analysis suggests that non-agricultural income, urbanization, and opportunities for skilled employment are important mechanisms, while agricultural income is not.