Costly Blackouts? Measuring Productivity and Environmental Effects of Electricity Shortages
30 Pages Posted: 2 Jan 2012
Date Written: December 30, 2011
In many countries, unreliable inputs, particularly those lacking storage, can significantly limit a firm's productivity. We examine industrial enterprises response to China's severe power shortages around 2003. Fast-growing demand coupled with regulated electricity prices led to blackouts varying over location and time. Our results suggest that enterprises shift from energy (both electric and non-electric sources) into materials - a shift from "make" to "buy." Textiles, timber, chemicals, and metals exhibit the largest effects. Contrary to the literature, we do not find greater self generation. We find that these productivity changes, while costly to firms, led to small reductions in carbon emissions.
Keywords: Productivity, Electricity, Blackouts, China
JEL Classification: D24, Q4, P2, L9
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