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The Impact of Electrification on Quality and Productivity: Evidence from Japanese Cotton Spinning

Author

Listed:
  • Chun Pang Chow

    (Vancouver School of Economics, University of British Columbia (E-mail: alexccp@student.ubc.ca))

  • Hiroyuki Kasahara

    (Vancouver School of Economics, University of British Columbia (E-mail: hkasahar@mail.ubc.ca))

  • Atsuki Kotani

    (Department of Economics, Boston University (E-mail: atsuki@bu.edu))

  • Yoichi Sugita

    (Faculty of Business and Commerce, Keio University (E-mail: ysugita@fbc.keio.ac.jp))

Abstract

Conventional productivity estimation treats unobserved heterogeneity as a single efficiency term, conflating product quality with physical output efficiency. This paper shows that unobserved quality and quantity-based productivity (TFPQ) can be separately identified from panel data on prices, quantities, and inputs when the two latent variables exhibit differential persistence. A constructive nonparametric identification argument based on transformation models is developed, alongside a parametric estimator for implementation. Applied to Japanese cotton spinning (1914-1920), instrumenting for electric motor adoption with geographic variation in electricity grid access, quality increased by 1.5 percent per percentage point increase in electric motor share while TFPQ remained unchanged. Full electrification raised quality by nearly 60 percent relative to no adoption.

Suggested Citation

  • Chun Pang Chow & Hiroyuki Kasahara & Atsuki Kotani & Yoichi Sugita, 2026. "The Impact of Electrification on Quality and Productivity: Evidence from Japanese Cotton Spinning," IMES Discussion Paper Series 26-E-13, Institute for Monetary and Economic Studies, Bank of Japan.
    • Handle: RePEc:ime:imedps:26-e-13
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    Keywords

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    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • N65 - Economic History - - Manufacturing and Construction - - - Asia including Middle East
    • 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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