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Does universal electrification shield firms from productivity loss?

Kehinde Abiodun and Ben Gilbert

World Development Perspectives, 2022, vol. 28, issue C

Abstract: Universal electrification may be a necessary but not sufficient condition for reliable electricity supply. Yet countries that have achieved universal electrification have made significant investments in building reliable electricity infrastructure relative to countries with low electrification rates. We examine the relationship between power outages and firm performance in four middle-income countries with universal electrification. Using data from the World Bank Enterprise Survey on over 8,000 firms from 39 regions across Egypt, Morocco, Tunisia, and Indonesia, we find no discernable negative association between outages and firm performance in two of three different specifications we employ. There is also some cross-country heterogeneity; we find that outages are associated with lower sales for firms in Tunisia in our main specification. However, these results for firms in Tunisia are not robust to other specifications with value added and total factor productivity as explained variable. Overall, our results are mixed, showing either a nonexistent or weak negative relationship between power outages and firm performance. These findings suggest that universal electrification is an important development goal, and while universally electrified countries may suffer some outages— which are fewer relative to those in low-electrification countries, firms in universally electrified countries are able to adapt to the remaining problems of reliability without incurring significant productivity losses.

Keywords: Universal electrification; Power outages; Reliability; Middle-income countries (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.wdp.2022.100467

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