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Powering Up Productivity: The Effects of Electrification on U.S. Manufacturing

Author

Listed:
  • Martin Fiszbein
  • Jeanne Lafortune
  • Ethan G. Lewis
  • José 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.

Suggested Citation

  • Martin Fiszbein & Jeanne Lafortune & Ethan G. Lewis & José Tessada, 2020. "Powering Up Productivity: The Effects of Electrification on U.S. Manufacturing," NBER Working Papers 28076, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28076
    Note: DAE LS PR
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    Cited by:

    1. Björn Brey, 2021. "The long-run gains from the early adoption of electricity," Discussion Papers 2021-05, University of Nottingham, GEP.
    2. Hashemi, Majid, 2021. "The economic value of unsupplied electricity: Evidence from Nepal," Energy Economics, Elsevier, vol. 95(C).

    More about this item

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • 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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