Was Electricity a General Purpose Technology

General Purpose Technologies (GPTs) are credited with generating the increasing returns that drive endogenous growth. For example, Paul David (1991) explains the surge in U.S. productivity during the 1920s as a delayed response to the introduction of the electric dynamo in the 1880s. To the extent that GPTs yield large positive externalities on a wide range of industries some time after they are discovered, individual inventors are likely to under-invest in them and government intervention may be necessary to reach optimal levels of investment in research and development. This theory assumes that GPTs can be identified. While the growth implications of GPTs are well-documented in theory (Elhanan Helpman, 1998) empirical evidence remains sparse. With the exception of Nathan Rosenberg and Manuel Trajtenberg (2001), who analyze the example of the Corliss steam engine, existing empirical work is based largely on data with a high level of aggregation (N.F.R. Crafts and Terrence Mills, 2003; Boyan Jovanovic and Peter Rousseau, 2003). This leaves a gap in our understanding of the micro-foundations of General Purpose Technologies. Although Richard Lipsey, Cliff Bekar, and Ken Carlaw (1998) define GPTs by four criteria -a wide scope for improvement and elaboration, applicability across a broad range of uses, potential for use in a wide variety of products and processes, and strong complementarities with existing or potential new technologies -these claims have not been verified systematically. This paper uses historical patent citation data to test whether electricity, as the canonical example of a General Purpose Technology, matches the current criteria of GPTs. We use a sample of American patents assigned to publicly traded companies in biennial years of the 1920s to check which of four industry categories -electricity, chemicals, mechanical and other -most