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