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Electricity provision and industrial development: Evidence from India

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  • Rud, Juan Pablo

Abstract

I investigate the effect of electricity provision on industrialization using a panel of Indian states for 1965–1984. To address the endogeneity of investment in electrification, I use the introduction of a new agricultural technology intensive in irrigation (the Green Revolution) as a natural experiment. As electric pumpsets are used to provide farmers with cheap irrigation water, I use the uneven availability of groundwater at the start of the Green Revolution to predict divergence in the expansion of the electricity network and, ultimately, to quantify the effect of electrification on industrial outcomes. I present a series of tests to show that the electrification channel remains the most important one among alternative explanations that could link groundwater availability to industrialization directly or indirectly. Results show that an increase in one standard deviation in the measure of electrification is associated with an increase of around 14% in manufacturing output for a state at the mean of the distribution.

Suggested Citation

  • Rud, Juan Pablo, 2012. "Electricity provision and industrial development: Evidence from India," Journal of Development Economics, Elsevier, vol. 97(2), pages 352-367.
  • Handle: RePEc:eee:deveco:v:97:y:2012:i:2:p:352-367
    DOI: 10.1016/j.jdeveco.2011.06.010
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    More about this item

    Keywords

    Development economics; Electrification; Infrastructure; Instrumental variables;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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