Agglomeration effects : studying agglomeration effects from Norwegian hydroelectricity plants

Abstract

This thesis aims to answer the research question "To what extent did the shocks to eco- nomic activity and population following openings of Norwegian hydroelectricity plants in the early 20th century lead to long run agglomeration effects?". The question is answered using data on population density and taxable income in 67 Norwegian municipalities in the period between 1876 and 2013. We utilize the fact that hydroelectricity plants opened before transportation of electricity over large distances was possible provide temporary shocks to population density and economic activity. Using a combination of the synthetic control method and the rolling out approach we estimate both short- and long run effects following the openings of hydroelectricity plants. The main conclusion is that opening hydroelectricity plants lead to significant short run effects in several of the municipalities in the data-set, but that the evidence for long run agglomeration effects is weak.