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Lights dim, exports down: Examining the trade effects of power shortages on Chinese manufacturing firms

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Listed:
  • Bao, Bingpeng
  • Fu, Dahai
  • Yu, Jian
  • Zhang, Ying

Abstract

While existing research extensively investigates the repercussions of demand shocks on export performance, limited attention has been given to understanding the trade implications of supply-side input shocks. Utilizing a city-level power shortage index and firm-level data from 2006 to 2014 for the Chinese manufacturing sector, we provide novel evidence of a significant negative impact of power shortages on export performance. This finding remains robust across alternative measurements and in addressing endogeneity concerns. Furthermore, we find that power shortages curtail firms' inventory and innovation activities, which are linked to export performance. Heterogeneity tests reveal insignificant impacts on state-owned firms, those in inland areas and high-energy-consuming industries as well. Additionally, our findings indicate that power shortages exclusively affect the intensive margins of exports rather than the extensive margins. This research offers valuable insights for policymakers and managers in devising strategies to mitigate the adverse effects of power shortages.

Suggested Citation

  • Bao, Bingpeng & Fu, Dahai & Yu, Jian & Zhang, Ying, 2024. "Lights dim, exports down: Examining the trade effects of power shortages on Chinese manufacturing firms," China Economic Review, Elsevier, vol. 88(C).
    • Handle: RePEc:eee:chieco:v:88:y:2024:i:c:s1043951x24001597
    DOI: 10.1016/j.chieco.2024.102270
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    More about this item

    Keywords

    Power shortages; Export performance; Chinese manufacturing firms; Trade effect;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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