When do toll roads pay ? Local conditions and the financial returns to English turnpike roads , 1820

Experience shows that private or locally financed toll roads do not always reward their investors. This paper studies a case where investors in toll roads earned competitive returns on average but with wide variation in outcomes. The context is England and Wales during their early industrialization when private investors provided much of the capital to improve what were called turnpike trust roads. This paper draws on parliamentary reports which provide data on financial returns for over 1000 turnpike trusts in 1820. The returns data are aggregated and matched with county-level characteristics on population density, coal endowments, and policy variables like the Herfindahl Index of local market concentration. Regression results show that population density and coal endowments explain much of the county-level variation in financial returns, indicating that local economic conditions were especially important. Low market concentration also played a role, mainly in dampening returns. JEL Codes: K23, N43, N73