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Electricity shortages and manufacturing productivity in Pakistan

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  • Grainger, Corbett A.
  • Zhang, Fan

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.

Suggested Citation

  • Grainger, Corbett A. & Zhang, Fan, 2019. "Electricity shortages and manufacturing productivity in Pakistan," Energy Policy, Elsevier, vol. 132(C), pages 1000-1008.
    • Handle: RePEc:eee:enepol:v:132:y:2019:i:c:p:1000-1008
    DOI: 10.1016/j.enpol.2019.05.040
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    Cited by:

    1. Abbasi ,Mansoureh & Lebrand,Mathilde Sylvie Maria & Mongoue,Arcady Bluette & Pongou,Roland & Zhang,Fan, 2022. "Roads, Electricity, and Jobs: Evidence of Infrastructure Complementarity in Sub-Saharan Africa," Policy Research Working Paper Series 9976, The World Bank.
    2. Tiep, Nguyen Cong & Wang, Mengqi & Mohsin, Muhammad & Kamran, Hafiz Waqas & Yazdi, Farzaneh Ahmadian, 2021. "An assessment of power sector reforms and utility performance to strengthen consumer self-confidence towards private investment," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 676-689.
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    4. Medeiros, Victor & Ribeiro, Rafael Saulo Marques, 2020. "Power infrastructure and income inequality: Evidence from Brazilian state-level data using dynamic panel data models," Energy Policy, Elsevier, vol. 146(C).
    5. Bhandary, Rishikesh Ram & Gallagher, Kelly Sims, 2022. "What drives Pakistan’s coal-fired power plant construction boom? Understanding the China-Pakistan Economic Corridor’s energy portfolio," World Development Perspectives, Elsevier, vol. 25(C).
    6. Thomas, Douglas & Fung, Juan, 2022. "Measuring downstream supply chain losses due to power disturbances," Energy Economics, Elsevier, vol. 114(C).
    7. Hashemi, Majid, 2021. "The economic value of unsupplied electricity: Evidence from Nepal," Energy Economics, Elsevier, vol. 95(C).
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    9. Yu, Jian & Liu, Peng & Fu, Dahai & Shi, Xunpeng, 2023. "How do power shortages affect CO2 emission intensity? Firm-level evidence from China," Energy, Elsevier, vol. 282(C).
    10. Muhammad U. Khan & Muhammad Ahmad & Muhammad Sultan & Ihsanullah Sohoo & Prakash C. Ghimire & Azlan Zahid & Abid Sarwar & Muhammad Farooq & Uzair Sajjad & Peyman Abdeshahian & Maryam Yousaf, 2021. "Biogas Production Potential from Livestock Manure in Pakistan," Sustainability, MDPI, vol. 13(12), pages 1-17, June.
    11. Xiao, Zumian & Gao, Juanhe & Wang, Zongshu & Yin, Zhichao & Xiang, Lijin, 2022. "Power shortage and firm productivity: Evidence from the World Bank Enterprise Survey," Energy, Elsevier, vol. 247(C).
    12. Nawaz, Zanib & Ali, Usman, 2020. "Techno-economic evaluation of different operating scenarios for indigenous and imported coal blends and biomass co-firing on supercritical coal fired power plant performance," Energy, Elsevier, vol. 212(C).
    13. Safder, Usman & Hai, Tra Nguyen & Loy-Benitez, Jorge & Yoo, ChangKyoo, 2022. "Nationwide policymaking strategies to prevent future electricity crises in developing countries using data-driven forecasting and fuzzy-SWOT analyses," Energy, Elsevier, vol. 259(C).
    14. Longsheng, Cheng & Ali Shah, Syed Ahsan & Solangi, Yasir Ahmed & Ahmad, Munir & Ali, Sharafat, 2022. "An integrated SWOT-multi-criteria analysis of implementing sustainable waste-to-energy in Pakistan," Renewable Energy, Elsevier, vol. 195(C), pages 1438-1453.
    15. Jabeen, Gul & Ahmad, Munir & Zhang, Qingyu, 2021. "Perceived critical factors affecting consumers’ intention to purchase renewable generation technologies: Rural-urban heterogeneity," Energy, Elsevier, vol. 218(C).

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    More about this item

    Keywords

    Electricity shortages; Pakistan; Manufacturing productivity; Climate change;
    All these keywords.

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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