Blog Post - November 2018

Rural electrification and structural transformation: A guar(anteed) bet?

What connects smallholder farmers in the semi-arid tracts of northwest India to the oil and gas barons of Texas and Oklahoma? A little green bean called guar! The seeds of this humble legume yield a potent thickening agent that greatly enhances the effectiveness of fracking fluid. As the fracking boom started in the United States, demand for guar skyrocketed, resulting in windfall gains for farmers across northwest India, the epicenter of global guar cultivation. Nearly simultaneously, India began rolling out its massive national rural electrification scheme, which prioritized certain villages based on a strict population-based eligibility criterion. In my job market paper, my coauthor Rob Fetter and I combine these two “natural experiments” to show that large-scale grid electrification can dramatically increase non-agricultural employment in rural economies when economic opportunity complements infrastructure—but if these complementary economic conditions are lacking, the grid may scarcely make a dent