In 1935 Franklin Roosevelt established the Rural Electrification Administration, and launched a large-scale initiative to bring electricity to what was then the Great Dust Bowl. This Act facilitated millions of dollars worth of loans to private, public and small cooperative utility ventures. Some of these new power companies paid folk singers to roam the Western United States and write songs which would promote rural electrification. The resulting Woody Guthrie song Grand Coulee Dam (1941) is perhaps the most specific about the positive effects of electrification on labour markets: “Now in Washington and Oregon you can hear the factories hum, Making chrome and making manganese and light aluminum.”. Guthrie, neither environmentalist nor economist, was one of many who believed that electrification would bring jobs and economic diversification, and have positive impacts on the rural standard of living.
Folk wisdom aside, a large literature now examines the effects of post-war technological changes on the US labour market. Rising US female labour force participation is attributed to technological improvements, and particularly to technologies that relaxed the time constraints from childbearing (see, for example Angrist and Evans (1998), Goldin and Katz (2002), Greenwood, Seshadri, and Vandenbrouke (2005), and Bailey (2006)). A major explanation of rising wage inequality in the US since the 1980s is that technological changes have been disproportionally beneficial to high-skilled workers (Acemoglu (1998), Acemoglu (2002), and Galor and Moav (2006)). Surprisingly, despite this extensive literature on the labour market effects of technological change, there is still very little work relating rural electrification to subsequent changes in the structure of the US labour market.
An extensive literature in development economics documents the effects of technological improvements such as the Green Revolution on human capital (Foster and Rosenzweig (1996)) and agricultural productivity (Murgai, Ali, and Byerlee (2001)), but very few papers have addressed the effects of community electrification on labour market diversification. Yet, according to the World Bank (2007), at least 1.6 billion people, about a quarter of the world’s population, still do not have access to electricity. Countries and regions with low electrification rates tend to be rural and agricultural, and to be extremely vulnerable to supply and demand shocks in agriculture. The lack of literature examining community electrification effects appears to be primarily attributable to a previous lack of data from developing countries on community level infrastructure provisions.
Two recent papers identify causal effects of electrification on labour market outcomes. Dinkleman (2008) examines the initial effects of a massive rural electrification program in Kwa-Zulu Natal, South Africa, on household fuel use and employment. The substantial observed effects on these two margins are attributed to changes in home production because of household electrification. Grogan and Sadanand (2008) model the effects of improved home production technology on fertility and time use, and test the model using household and community-level data from Guatemala. The positive causal effects of household electrification on the time women spend in market activities and on their earnings are found to be very large.
Diversification of local labour markets is clearly a favorable policy outcome. Sectoral shocks, such as drought, may have less dramatic impacts on poverty when a smaller fraction of the local working population is employed in this sector. New industries and occupations which use electricity may provide greater returns to experience and permit individuals greater improvements in the marginal product of their labour. As well, communities with more diverse economic bases are less vulnerable to negative shocks in demand for their output. If community electrification does have causal effects on labour market diversification, these should thus be taken account of in cost-benefit studies of electrification projects.
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