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Does electricity drive structural transformation? Evidence from the United States

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  • Gaggl, Paul
  • Gray, Rowena
  • Marinescu, Ioana
  • Morin, Miguel

Abstract

Electricity was the catalyst for the second industrial revolution in the early twentieth century. Developing countries are currently making huge investments in this general-purpose technology, with a view to achieving structural change. What can history teach us about its impact on the structure of employment? We use U.S. Census data and an identification strategy based on hydroelectric potential to identify the effects of the geographic expansion of higher-voltage electricity lines. We find that, over the period 1910–1940, electrification increased the share of operatives in the average county by 3.5 percentage points and decreased the share of farmers by 2.9 percentage points. These effects are primarily driven by rural electrification, and they can account for more than half of the aggregate increase in operatives, and more than one quarter of the total decrease in farmers. These results suggest that electrification was a key contributor to U.S. structural transformation.

Suggested Citation

  • Gaggl, Paul & Gray, Rowena & Marinescu, Ioana & Morin, Miguel, 2021. "Does electricity drive structural transformation? Evidence from the United States," Labour Economics, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:labeco:v:68:y:2021:i:c:s0927537120301482
    DOI: 10.1016/j.labeco.2020.101944
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    Cited by:

    1. Daniela Vidart, 2024. "Human Capital, Female Employment, and Electricity: Evidence from the Early 20th-Century United States," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(1), pages 560-594.
    2. Lebrand,Mathilde Sylvie Maria, 2022. "Infrastructure and Structural Change in the Lake Chad Region," Policy Research Working Paper Series 9899, The World Bank.
    3. Björn Brey, 2021. "The long-run gains from the early adoption of electricity," Discussion Papers 2021-05, University of Nottingham, GEP.
    4. Richard S. J. Tol, 2023. "Navigating the energy trilemma during geopolitical and environmental crises," Papers 2301.07671, arXiv.org.
    5. 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.
    6. Fried, Stephie & Lagakos, David, 2021. "Rural electrification, migration and structural transformation: Evidence from Ethiopia," Regional Science and Urban Economics, Elsevier, vol. 91(C).
    7. Eichengreen, Barry, 2022. "COVID and the outlook for emerging markets," Journal of Policy Modeling, Elsevier, vol. 44(4), pages 820-826.
    8. 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.
    9. 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.
    10. Clay, Karen & Lewis, Joshua & Severnini, Edson, 2024. "The historical impact of coal on cities," Regional Science and Urban Economics, Elsevier, vol. 107(C).

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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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