Working Paper: NBER ID: w28076
Authors: Martin Fiszbein; Jeanne Lafortune; Ethan G. Lewis; Jos Tessada
Abstract: We use 1890-1940 sector-county level data to identify the impact of electricity on manufacturing industries, exploiting pre-electrification variation in energy intensity across industries combined with variation across locations in proximity to early hydroelectric power plants. We find that labor productivity gains from electricity were rapid and long-lasting, in contrast with established narratives. Electrification was quickly accompanied by capital deepening and organizational changes that may have contributed to these gains. Impacts varied with market structure: productivity increased without expanding employment in sector-county cells with large initial firm size, while, in contrast, both output and employment increased in cells with small initial firm size.
Keywords: Electrification; Productivity; Manufacturing; Labor Markets
JEL Codes: J24; L11; O33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Electricity adoption (L94) | Productivity growth (O49) |
| Access to hydropower (L94) | Electricity adoption (L94) |
| Electricity adoption (L94) | Changes in production processes (L23) |
| Changes in production processes (L23) | Increased capital intensity (E22) |
| Changes in production processes (L23) | Shifts in skill composition of workforce (J24) |
| Electricity adoption (L94) | Job creation (J23) |
| Electricity adoption (L94) | Reduction in medium-skill jobs (F66) |
| Electricity adoption (L94) | Increase in low-skill jobs (F66) |
| Market structure (D49) | Mediation of impacts of electricity on productivity (L94) |
| Market structure (D49) | Mediation of impacts of electricity on employment (L94) |
| Electricity adoption (L94) | Differences in demand elasticity (D12) |