PROTECTION AGAINST A CAPRICIOUS STATE - FRENCH INVESTMENT AND SPANISHRAILROADS, 1845-1875

Infrastructure construction is often associated with excessive, even c orrupt, profits. This article argues that construction profits earned in Spanish railroads in the mid-nineteenth century were a response to the lack of credibility of the Spanish state. It also makes the first attempt to document excess construction profits in Spanish railroads b y demonstrating, for example, financial links between railroad stockho lders and the providers of construction goods and services and by dire ctly estimating construction profits. The estimated excess constructio n profits only provided railroad entrepreneurs with a normal rate of r eturn to their entire railroad-related investments.