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Impact of Electricity Shortages on Productivity: Evidence from Manufacturing Industries

Xinhong Xue1, Zhongcheng Wang2,*

1 School of Finance, Anhui University of Finance & Economics, Bengbu, 233030, China
2 School of International Trade and Economics, Anhui University of Finance & Economics, Bengbu, 233030, China

* Corresponding Author: Zhongcheng Wang. Email: email

Energy Engineering 2021, 118(4), 995-1008.


Electricity shortages present a significant constraint on manufacturers, who rely on electricity as an important input into production. In China, electricity supply has been growing rapidly. However, the rapid industrialization sometimes makes the power supply still unable to meet the demand. Using a survey of 1673 Chinese manufacturing firms, this paper explores how firms response to electricity shortages and its impact on productivity. We find that self-generation of electricity and investment in Research and Development (R&D) have significant positive relationships with electricity shortages. Further investigations reveal that self-generation is the most common way to deal with electricity shortages. However, it aggravates productivity loss. Though investment in Research and Development can promote productivity, it cannot offset the negative impact of electricity shortages on productivity. Analyses on subsamples show heterogeneity in the impacts of electricity shortages across firms. In particular, large firms are more inclined to invest in R&D than small and medium-sized firms are. They are also the one who suffer significant productivity loss due to self-generation of electricity. Though it is possible for medium-sized firms to reduce productivity loss through R&D, they are not likely to invest in R&D as a response to electricity shortages. This study illustrates that firms can hardly have effective solutions to electricity shortages, and policy makers should take great efforts to increase electricity supply.


Cite This Article

Xue, X., Wang, Z. (2021). Impact of Electricity Shortages on Productivity: Evidence from Manufacturing Industries. Energy Engineering, 118(4), 995–1008.

cc This work is licensed under a Creative Commons Attribution 4.0 International License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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