Development Effects of Electrification: Evidence from the Topographic Placement of Hydropower Plants in Brazil

We estimate the development effects of electrification across Brazil over the period 1960–2000. We simulate a time series of hypothetical electricity grids for Brazil for the period 1960–2000 that show how the grid would have evolved had infrastructure investments been made based solely on geography-based cost considerations. Using the model as an instrument, we document large positive effects of electrification on development that are underestimated when one fails to account for endogenous targeting. Broad-based improvement in labor productivity across sectors and regions rather than general equilibrium re-sorting appears to be the likely mechanism by which these development gains are realized. (JEL H54, L94, O11, O13, Q41, Q43)