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Does Electricity Drive Structural Transformation? Evidence from the United States

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Listed:
  • Paul Gaggl
  • Rowena Gray
  • Ioana Marinescu
  • Miguel Morin

Abstract

Electricity is a general purpose technology and the catalyst for the second industrial revolution. Developing countries are currently making huge investments in electrification, with a view to achieving structural change. What does history say about its impact on the structure of employment? We use U.S. Census data from 1910 to 1940 and measure electrification with the length of higher-voltage electricity lines. Instrumenting for electrification using hydroelectric potential, we find that the average expansion of high-voltage transmission lines between 1910 and 1940 increased the share of operatives in a county by 3.3 percentage points and decreased the share of farmers by 2.1 percentage points. Electrification can explain 50.5% of the total increase in operatives, and 18.1% of the total decrease in farmers between 1910 and 1940. At the industry level, electrification drove 15.7% of the decline in the share of agricultural employment and 28.4% of the increase in the share of manufacturing employment between 1910 and 1940. Electrification was thus a key driver of structural transformation in the U.S. economy.

Suggested Citation

  • Paul Gaggl & Rowena Gray & Ioana Marinescu & Miguel Morin, 2019. "Does Electricity Drive Structural Transformation? Evidence from the United States," CESifo Working Paper Series 7930, CESifo.
    • Handle: RePEc:ces:ceswps:_7930
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    Cited by:

    1. Jaime Nieto & Pedro B. Moyano & Diego Moyano & Luis Javier Miguel, 2023. "Is energy intensity a driver of structural change? Empirical evidence from the global economy," Journal of Industrial Ecology, Yale University, vol. 27(1), pages 283-296, February.
    2. Daniela Vidart, 2021. "Human Capital, Female Employment, and Electricity: Evidence from the Early 20th Century United States," Working papers 2021-08, University of Connecticut, Department of Economics, revised Sep 2022.
    3. Sarah Quincy & Rowena Gray, 2022. "Boomtowns: Local Shocks and Inequality in 1920s California," AEA Papers and Proceedings, American Economic Association, vol. 112, pages 209-213, May.
    4. Richard S. J. Tol, 2023. "Navigating the energy trilemma during geopolitical and environmental crises," Papers 2301.07671, arXiv.org.
    5. Lebrand,Mathilde Sylvie Maria, 2022. "Infrastructure and Structural Change in the Lake Chad Region," Policy Research Working Paper Series 9899, The World Bank.
    6. Björn Brey, 2021. "The long-run gains from the early adoption of electricity," Discussion Papers 2021-05, University of Nottingham, GEP.
    7. Sergio Petralia, 2020. "GPTs and Growth: Evidence on the Technological Adoption of Electrical & Electronic Technologies in the 1920s," Papers in Evolutionary Economic Geography (PEEG) 2033, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Aug 2020.
    8. Fried, Stephie & Lagakos, David, 2021. "Rural electrification, migration and structural transformation: Evidence from Ethiopia," Regional Science and Urban Economics, Elsevier, vol. 91(C).
    9. Eichengreen, Barry, 2022. "COVID and the outlook for emerging markets," Journal of Policy Modeling, Elsevier, vol. 44(4), pages 820-826.

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    More about this item

    Keywords

    technological change; electrification; structural change;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • N32 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: 1913-
    • N72 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: 1913-
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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