Does Electricity Drive Structural Transformation? Evidence from the United States

43 Pages Posted: 19 May 2020

See all articles by Paul Gaggl

Paul Gaggl

University of North Carolina at Charlotte, Belk College of Business, Department of Economics

Rowena Gray

University of California, Merced - School of Social Sciences, Humanities and Arts

Ioana Elena Marinescu

University of Pennsylvania - School of Social Policy & Practice; National Bureau of Economic Research (NBER)

Miguel Morin

University of Cambridge - Faculty of Economics

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Abstract

Electricity is a general purpose technology and the catalyst for the second industrial revolution. What was its impact on the structure of employment? We use U.S. Census data from 1910 to 1940 and measure electrification with the length of higher-voltage electricity lines. Instrumenting for electrification using hydro-electric potential, we find that the average expansion of high-voltage transmission lines between 1910 and 1940 increased the share of operatives in a county by 3.3 percentage points and decreased the share of farmers by 2.1 percentage points. Electrification can explain 50.5% of the total increase in operatives, and 18.1% of the total decrease in farmers between 1910 and 1940. At the industry level, electrification drove 15.7% of the decline in the share of agricultural employment and 28.4% of the increase in the share of manufacturing employment between 1910 and 1940. Electrification was thus a key driver of structural transformation in the U.S. economy.

Keywords: technological change, electrification, structural change

JEL Classification: E25, E22, J24, J31, N32, N72, O33

Suggested Citation

Gaggl, Paul and Gray, Rowena and Marinescu, Ioana Elena and Morin, Miguel, Does Electricity Drive Structural Transformation? Evidence from the United States. IZA Discussion Paper No. 13243, Available at SSRN: https://ssrn.com/abstract=3602419

Paul Gaggl (Contact Author)

University of North Carolina at Charlotte, Belk College of Business, Department of Economics ( email )

9201 University City Blvd
Charlotte, NC 28223
United States

Rowena Gray

University of California, Merced - School of Social Sciences, Humanities and Arts ( email )

P.O. Box 2039
Merced, CA 95344
United States

Ioana Elena Marinescu

University of Pennsylvania - School of Social Policy & Practice ( email )

3701 Locust Walk
Philadelphia, PA 19104-6214
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Miguel Morin

University of Cambridge - Faculty of Economics ( email )

Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom

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