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Electricity shortages and manufacturing productivity in Pakistan

Corbett Grainger and Fan Zhang

Energy Policy, 2019, vol. 132, issue C, 1000-1008

Abstract: Electricity shortages present a significant challenge to manufacturers who require a reliable power source as an input to production. In Pakistan, power shortages are commonplace, but empirical evidence on the impact of shortages is still lacking. Using a survey of 4500 manufacturing firms for the year 2010–2011, we exploit regional differences in outages to estimate the impact of electricity shortages on firm revenues, value-added and the labor share of output. We find that an additional average daily hour of unexpected shortages decreases annual revenues by nearly 10%. Similarly, an increase in shortages by 1 h per day decreases annual value-added at the firm level by roughly 20%, and increases the labor share of output. We find that the impact for a similar amount of load-shedding is significantly smaller, likely due to predictability and firm adaptation. Our results suggest that a more reliable electricity supply would significantly improve manufacturing productivity in the region.

Keywords: Electricity shortages; Pakistan; Manufacturing productivity; Climate change (search for similar items in EconPapers)
JEL-codes: D04 D24 L11 L94 O12 O13 Q48 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.enpol.2019.05.040

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