Abstract:
Economic historians have debated the importance of energy for economic development. Energy economists would argue that energy systems need to be adaptable in the face of shocks. In this light, we consider the case of Denmark, a country which was almost entirely dependent on imports of coal, and where a long coastline made imports, largely from the UK, cheap and available. Towards the end of the First World War, however, and well into the 1920s, coal imports were cut off or difficult to obtain. We exploit detailed microlevel data from butter factories, covering the period 1900-28. We find that firms were able to adapt and make use of alternative fuels, notably peat, although its availability varied across the country. Employing a difference-in-differences approach, we find significant productivity advantages for creameries closer to available peat fields in the wake of the coal shortage.
