Supersedes Working Paper 10-27 - Portage: Path Dependence and Increasing Returns in U.S. History
Historically, waterborne transport of goods required portage around the falls at these points, while some falls provided water power during early industrialization. These factors attracted commerce and manufacturing. Although these original advantages have long since been made obsolete, the authors document the continuing importance of these portage sites over time. They interpret these results as path dependence and contrast explanations based on sunk costs interacting with decreasing versus increasing returns to scale.