The Impact of Electrification on Quality and Productivity: Evidence from Japanese Cotton Spinning

Chun Pang Chow, Hiroyuki Kasahara, Atsuki Kotani and Yoichi Sugita
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Chun Pang Chow: Vancouver School of Economics, University of British Columbia (E-mail: alexccp@student.ubc.ca)
Hiroyuki Kasahara: Vancouver School of Economics, University of British Columbia (E-mail: hkasahar@mail.ubc.ca)
Atsuki Kotani: Department of Economics, Boston University (E-mail: atsuki@bu.edu)
Yoichi Sugita: Faculty of Business and Commerce, Keio University (E-mail: ysugita@fbc.keio.ac.jp)

No 26-E-13, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan

Abstract: Conventional productivity estimation treats unobserved heterogeneity as a single efficiency term, conflating product quality with physical output efficiency. This paper shows that unobserved quality and quantity-based productivity (TFPQ) can be separately identified from panel data on prices, quantities, and inputs when the two latent variables exhibit differential persistence. A constructive nonparametric identification argument based on transformation models is developed, alongside a parametric estimator for implementation. Applied to Japanese cotton spinning (1914-1920), instrumenting for electric motor adoption with geographic variation in electricity grid access, quality increased by 1.5 percent per percentage point increase in electric motor share while TFPQ remained unchanged. Full electrification raised quality by nearly 60 percent relative to no adoption.

Keywords: Production function; quality; productivity; electrification (search for similar items in EconPapers)
JEL-codes: D24 L11 N65 O33 (search for similar items in EconPapers)
Date: 2026-10
New Economics Papers: this item is included in nep-bec
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Persistent link: https://EconPapers.repec.org/RePEc:ime:imedps:26-e-13

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