Sparking Knowledge: Early Technology Adoption, Innovation Ability and Long-Run Growth

Abstract This paper examines the benefits of first-mover advantages in technology adoption. It documents that the early adoption of electricity across late 19th-century Switzerland was conducive to local economic development not just in the short run but also in the long run. By exploiting exogenous variation in waterpower potential, alongside rapid advancements in power transmission technology, these findings can be interpreted as causal. The main mechanism through which differences in economic development persist is increased human capital accumulation and innovativeness. In contrast, I was unable to uncover any evidence supporting a number of alternative mechanisms: (1) persistent differences in the use of electricity, (2) household electrification, (3) local gains from resource windfalls, (4) returns to scale and physical capital accumulation, and (5) population agglomeration.