US rural electrification in the 1930s..

Carl Kitchens (of University of Mississippi) explains how rural electrficiation in 1930s helped US economy:

It is a result which would be really surprising if it did not happen:

Economists have found that large-scale infrastructure investments tend to increase economic growth and reduce poverty. However, there has been relatively little research on the effects of smaller, more targeted investment projects. This column discusses recent research on the effects of the US Rural Electrification Administration, which provided subsidised loans for connecting farms to the electric grid. Counties that received electricity through the REA witnessed smaller declines in agricultural productivity, smaller declines in land values, and more retail activity than similar counties that did not.

Subsidised loans? Did I read that correctly?

While large-scale projects have demonstrated benefits, often at a large expense, the literature has neglected smaller, more targeted, less expensive projects. In new research (Kitchens and Fishback 2013), we focus on electrification projects that directly connect rural consumers to the electric grid. In 1935, the Rural Electrification Administration (REA) was created in the US. In a five-year period, the REA provided $3.6 billion in subsidised loans to newly established cooperatively owned utilities. With these funds, rural utilities doubled the number of farms receiving electric service, and constructed more rural distribution line than private companies had constructed in the previous 50 years.

Using a sample of approximately 1,400 rural counties in the US from 1930 to 1940, we estimate the relationship between changes in access to electricity via the REA and agricultural outcomes such as crop values, livestock values, farm size, and land values. We are interested in how counties that received access to electricity from the REA changed relative to similar counties that did not receive REA electricity.

Our empirical findings suggest that access to electricity improved outcomes in agricultural counties. While agriculture was in decline everywhere at the peak of the Great Depression, counties that received electricity through the REA witnessed smaller declines in agricultural productivity, smaller declines in land values, and more retail activity relative to counties that did not obtain electricity from the REA.

Hmm..

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