Electricity shortages and firm productivity: Evidence from China's industrial firms

Karen Fisher-Vanden, Erin T. Mansur, Qiong Juliana Wang

Research output: Contribution to journalArticle

38 Scopus citations

Abstract

Unreliable inputs to production, particularly those that are difficult to store, can significantly limit firms' productivity, leading them to react in a number of ways. This paper uses a panel of 23,000 energy-intensive, Chinese firms from 1999 to 2004 to examine how firms responded to severe power shortages in the early 2000s. Our results suggest that, in response to electricity scarcity, Chinese firms re-optimize among inputs to production by substituting materials for energy (both electric and non-electric sources)-a shift from "make" to "buy" of intermediate inputs to production. While outsourcing can be costly, Chinese firms were able to avoid substantial productivity losses by doing so. As a result of the increase in electricity scarcity from 1999 onward, we find that unit production costs increased by eight percent.

Original languageEnglish (US)
Pages (from-to)172-188
Number of pages17
JournalJournal of Development Economics
Volume114
DOIs
StatePublished - May 1 2015

All Science Journal Classification (ASJC) codes

  • Development
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Electricity shortages and firm productivity: Evidence from China's industrial firms'. Together they form a unique fingerprint.

  • Cite this