How Do Electricity Shortages Affect Industry? Evidence from India

Hunt Allcott, Allan Collard-Wexler and Stephen O'Connell

American Economic Review, 2016, vol. 106, issue 3, 587-624

Abstract: We estimate the effects of electricity shortages on Indian manufacturers, instrumenting with supply shifts from hydroelectric power availability. We estimate that India's average reported level of shortages reduces the average plant's revenues and producer surplus by 5 to 10 percent, but average productivity losses are significantly smaller because most inputs can be stored during outages. Shortages distort the plant size distribution, as there are significant economies of scale in generator costs and shortages more severely affect plants without generators. Simulations show that offering interruptible retail electricity contracts could substantially reduce the impacts of shortages. (JEL D24, L60, L94, O13, O14, Q41)

JEL-codes: D24 L60 L94 O13 O14 Q41 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/aer.20140389
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Citations: View citations in EconPapers (183)

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Working Paper: How Do Electricity Shortages Affect Industry? Evidence from India (2014)
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