New Technologies, Productivity, and Jobs: The (Heterogeneous) Effects of Electrification on US Manufacturing
We use city-industry data from 1890 to 1940 to identify the impact of electricity on manufacturing. We exploit cross-industry variation in pre-electricity energy intensity combined with geographic variation in proximity to early hydroelectric power plants. Labor productivity gains from the arrival of electricity were rapid and long-lasting. Electricity was labor-saving, induced capital deepening, and a hollowing out of the labor skills distribution. We document significant heterogeneity in electricity's effects: in sector-county pairs where the average firm was initially large, we find no significant expansion in employment, while in markets with relatively small firms, output and employment increased.
We thank Javiera García and Sebastían Poblete for research assistance. We thank Daron Acemoglu, David Autor and participants at the NBER SI 2020, SOLE/EALE 2020, Economics Seminar of University of Virginia, University of San Andres, SECHI 2019 and LACEA-LAMES 2019 for their valuable suggestions and comments. A previous version of this paper circulated under the title “Electrifying? How New Technologies Impact Productivity and Jobs.” All remaining errors are our own. Lafortune and Tessada thank Fondecyt (Grant Regular No 1181812). Corresponding author: Jeanne Lafortune, E-mail: email@example.com. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.