Power Constraints and Firm-Level Total Factor Productivity in Developing Countries
This paper analyzes the effects of power outages and constraints on manufacturing firms’ revenue-based total factor productivity in developing countries. The empirical analysis is based on the World Bank Enterprise Survey datasets for 84 countries over 2006–2019. The paper starts by showing statistically that firms facing power outages differ and operate in very different environments compared to firms not facing power outages, underlining a potential nonrandom issue of the treatment variable. The matching-based approach (entropy balancing) is designed to contain this type of bias. It shows that power outages negatively and significantly affect firm-level revenue-based total factor productivity, with a 9 percent lower unconditional average productivity for exposed firms compared to nonexposed firms. Moreover, the estimates suggest a connection between the severity of self-reported power constraints or obstacles by firms and the magnitude of revenue-based total factor productivity loss. The results also indicate that the effect of power outages on firm-level revenue-based total factor productivity could be influenced by the stage of economic development (low-income countries, lower-middle-income countries, upper-middle-income countries), and the ability of firms to engage in research and development and purchase backup generators. These findings suggest that to ensure economic development, the government should provide a stable power supply that can mitigate the negative shocks faced by manufacturing firms and enhance their productivity and competitiveness, allowing them to drive economic growth.
| Main Authors: | , |
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| Format: | Working Paper biblioteca |
| Language: | English English |
| Published: |
World Bank, Washington, DC
2023-07-17
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| Subjects: | POWER CONSTRAINTS, PRODUCTIVITY CONSTRAINT, WORLD BANK ENTERPRISE SURVEY DATA, COMMERCIAL POWER OUTAGE IMPACT, ELECTRICITY OUTAGES, PRODUCTIVITY AND INFRASTRUCTURE, POWER GRID, POWER AND ECONOMIC GROWTH, |
| Online Access: | http://documents.worldbank.org/curated/en/099703406272317386/IDU0431050dd0a9530424d0a8c80fd5ee66c49eb https://openknowledge.worldbank.org/handle/10986/40015 |
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| Summary: | This paper analyzes the effects of
power outages and constraints on manufacturing firms’
revenue-based total factor productivity in developing
countries. The empirical analysis is based on the World Bank
Enterprise Survey datasets for 84 countries over 2006–2019.
The paper starts by showing statistically that firms facing
power outages differ and operate in very different
environments compared to firms not facing power outages,
underlining a potential nonrandom issue of the treatment
variable. The matching-based approach (entropy balancing) is
designed to contain this type of bias. It shows that power
outages negatively and significantly affect firm-level
revenue-based total factor productivity, with a 9 percent
lower unconditional average productivity for exposed firms
compared to nonexposed firms. Moreover, the estimates
suggest a connection between the severity of self-reported
power constraints or obstacles by firms and the magnitude of
revenue-based total factor productivity loss. The results
also indicate that the effect of power outages on firm-level
revenue-based total factor productivity could be influenced
by the stage of economic development (low-income countries,
lower-middle-income countries, upper-middle-income
countries), and the ability of firms to engage in research
and development and purchase backup generators. These
findings suggest that to ensure economic development, the
government should provide a stable power supply that can
mitigate the negative shocks faced by manufacturing firms
and enhance their productivity and competitiveness, allowing
them to drive economic growth. |
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