Electricity and Directed Technological Change: Evidence from U.S. Rural Electrification, 1910-1950
This paper identifies the causal impact of the U.S. rural electrification on agricultural innovation between 1910 and 1950. We combine cross-county variation in access to the closest hydro-power plant and cross-crop variation in energy intensity before the arrival of electricity to identify the effect of electrification on the number of electric patents related to each of these crops. We find evidence that agricultural innovation responded to local incentives, and thus having access to cheaper electricity increases the number of electric patents – specially for energy-intensive crops, while electric patents decrease. These new electric patents are relevant and widely cited in the future, and are mainly attributed to a new generation of inventors. This would be consistent with theories of endogenous technological change where inventions respond to local relative factor prices. As further indication of this, we find larger impacts in counties with labour shortages, counties with a larger market sizes.
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