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Flip the Switch: The Impact of the Rural Electrification Administration 1935–1940

  • Carl Kitchens (a1) and Price Fishback (a2)

To isolate the impact of access to electricity on local economies, we examine the impact of the Rural Electrification Administration low-interest loans in the 1930s. The REA provided loans to cooperatives to lay distribution lines to farms and aid in wiring homes. Consequently, the number of rural farm homes electrified doubled in the United States within five years. We develop a panel data set for the 1930s and use changes within counties over time to identify the effect of the REA loans on a wide range of socio-economic measures. The REA loans contributed significantly to increases in crop output and crop productivity and helped stave off declines in overall farm output, productivity, and land values, but they had much smaller effects on nonagricultural parts of the economy. The ex-ante subsidy from the low-interest loans was large, but after the program was completed, nearly all of the loans were fully repaid, and the ultimate cost to the taxpayer was relatively low.

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The authors would like to thank seminar and conference participants at University of Arizona, University of Mississippi, Florida State University, 7th World Congress of Cliometrics, NBER-DAE Spring Program Meeting 2014, and Southern Economic Association Annual Meeting 2013.

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