Working Paper: NBER ID: w19743
Authors: Carl Kitchens; Price Fishback
Abstract: To isolate the impact of access to electricity on local economies, we examine the impact of the Rural Electrification Administration low-interest loans in the 1930s. The REA provided loans to cooperatives to lay distribution lines to farms and aid in wiring homes. Consequently, the number of rural farm homes electrified doubled in the United States within 5 years. We develop a panel data set for the 1930s and use changes within counties over time to identify the effect of the REA loans on a wide range of socio-economic measures. The REA loans contributed significantly to increases in crop output and crop productivity and helped stave off declines in overall farm output, productivity, and land values, but had much smaller effects on nonagricultural parts of the economy. The ex-ante subsidy from the low interest loans was large, but after the program was completed, nearly all of the loans were fully repaid, and the ultimate cost to the taxpayer was relatively low.
Keywords: Rural Electrification; Economic Impact; Panel Data; Socioeconomic Measures
JEL Codes: N12; O13; O38
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| REA loans (R33) | increases in crop output (Q11) |
| REA loans (R33) | increases in crop productivity (Q16) |
| REA loans (R33) | staving off declines in overall farm output (Q16) |
| REA loans (R33) | staving off declines in productivity (O49) |
| REA loans (R33) | staving off declines in land values (Q15) |
| REA loans (R33) | rise in overall crop output (Q11) |
| REA loans (R33) | rise in crop output per farm (Q15) |
| REA loans (R33) | rise in crop output per acre (Q11) |
| REA loans (R33) | transformation of counties (R59) |
| REA loans (R33) | promoting recovery relative to non-REA counties (R59) |