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Flip the Switch: The Spatial Impact of the Rural Electrification Administration 1935-1940

  • Carl Kitchens
  • Price Fishback

To isolate the impact of access to electricity on local economies, we examine the impact of the Rural Electrification Administration low-interest loans in the 1930s. The REA provided loans to cooperatives to lay distribution lines to farms and aid in wiring homes. Consequently, the number of rural farm homes electrified doubled in the United States within 5 years. We develop a panel data set for the 1930s and use changes within counties over time to identify the effect of the REA loans on a wide range of socio-economic measures. The REA loans contributed significantly to increases in crop output and crop productivity and helped stave off declines in overall farm output, productivity, and land values, but had much smaller effects on nonagricultural parts of the economy. The ex-ante subsidy from the low interest loans was large, but after the program was completed, nearly all of the loans were fully repaid, and the ultimate cost to the taxpayer was relatively low.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19743.

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Date of creation: Dec 2013
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Handle: RePEc:nbr:nberwo:19743
Note: DAE
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  1. Michael Greenstone & Richard Hornbeck & Enrico Moretti, 2010. "Identifying Agglomeration Spillovers: Evidence from Winners and Losers of Large Plant Openings," Journal of Political Economy, University of Chicago Press, vol. 118(3), pages 536-598, 06.
  2. Enrico Moretti, 2014. "Local Economic Development, Agglomeration Economies, and the Big Push: 100 Years of Evidence from the Tennessee Valley Authority," The Quarterly Journal of Economics, Oxford University Press, vol. 129(1), pages 275-331.
  3. Harold L. Cole & Lee E. Ohanian, 2004. "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 779-816, August.
  4. Fishback, Price V. & Horrace, William C. & Kantor, Shawn, 2005. "Did New Deal Grant Programs Stimulate Local Economies? A Study of Federal Grants and Retail Sales During the Great Depression," The Journal of Economic History, Cambridge University Press, vol. 65(01), pages 36-71, March.
  5. Taryn Dinkelman, 2011. "The Effects of Rural Electrification on Employment: New Evidence from South Africa," American Economic Review, American Economic Association, vol. 101(7), pages 3078-3108, December.
  6. Jason E. Taylor, 2011. "Work‐sharing During the Great Depression: Did the ‘President's Reemployment Agreement’ Promote Reemployment?," Economica, London School of Economics and Political Science, vol. 78(309), pages 133-158, January.
  7. Barham, Tania & Lipscomb, Molly & Mobarak, Ahmed Mushfiq, 2011. "Development Effects of Electrification: Evidence from the Geologic Placement of Hydropower Plants in Brazil," CEPR Discussion Papers 8427, C.E.P.R. Discussion Papers.
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