Electricity Supply Unreliability and Technical Efficiency: Evidence from Listed Chinese Manufacturing Companies

Presley K. Wesseh, Yuqing Zhong and Chin Hui Hao ()
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Presley K. Wesseh: China Institute for Studies in Energy Policy, School of Management, Xiamen University, Xiamen 361005, China
Yuqing Zhong: China Institute for Studies in Energy Policy, School of Management, Xiamen University, Xiamen 361005, China
Chin Hui Hao: College of International Business and Trade, Xiamen Ocean Vocational College, Xiamen 361100, China

Energies, 2023, vol. 16, issue 7, 1-14

Abstract: This study examines the extent to which electricity shortage influences technical efficiency using data of 805 listed manufacturing companies in China from 2009 to 2020 collected from the CSMAR database. To achieve the objectives of this paper, first, a stochastic frontier analysis (SFA) is used to estimate the technical efficiency (TE) score of manufacturing companies. Subsequently, the TE score is used to evaluate the electricity shortage index and other factors that are postulated to affect enterprise productivity. Two estimation methods have been adopted including ordinary least squares (OLS), which is less robust to endogeneity and instrumental variable (IV) estimation, which turns out to be more robust to endogeneity in the data. The empirical results show that, under OLS estimation, electricity shortage has a significantly negative impact on the technical efficiency of the listed manufacturing companies. However, when IV regression is implemented to address endogeneity issues in the data, electricity shortages tend to have a significantly positive impact on the technical efficiency, underscoring the importance of capturing endogeneity in the data. Extending the baseline results, this study also finds that, while the size of an enterprise may have no bearing, state-owned companies are more likely to be negatively affected by electricity shortages compared to privately owned companies. These results have significant implications for industrial policy design in China in particular, and developing countries in general. Most importantly, the results of this study underscore the importance of policies and measures to promote a shift in the ownership structure towards the private sector.

Keywords: electricity shortage; technical efficiency; stochastic frontier analysis; China (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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