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Power outages and firm performance: a hydro-IV approach for a single electricity grid

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  • Elliott, Robert J.R.
  • Nguyen-Tien, Viet
  • Strobl, Eric A.

Abstract

We estimate the impact of power outages on firm performance using a hydro-instrumental variable strategy which integrates a river flow with a hydropower generation model and an electricity-grid-based distance interpolation technique. Comparing World Bank Enterprise Surveys in 2005 and 2015 for Vietnam, we find that despite considerable economic progress, firms have become more susceptible to power outages. Our estimates suggest that reducing the length of power cuts by 1% would have increased revenues by 4.66 billion USD. Other results show that firms with less reliable electricity have lower productivity and use less flexible inputs, which is not mitigated by backup generators.

Suggested Citation

  • Elliott, Robert J.R. & Nguyen-Tien, Viet & Strobl, Eric A., 2021. "Power outages and firm performance: a hydro-IV approach for a single electricity grid," LSE Research Online Documents on Economics 112538, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:112538
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    Cited by:

    1. Guo, Dongmei & Li, Qin & Liu, Peng & Shi, Xunpeng & Yu, Jian, 2023. "Power shortage and firm performance: Evidence from a Chinese city power shortage index," Energy Economics, Elsevier, vol. 119(C).
    2. Lin, Weifen & Tong, Xinyue & Hu, Yao & Wang, Hui, 2024. "The flow of industrial lifeblood: The impact of the West-to-East oil transportation project on enterprise performance of China," Energy Economics, Elsevier, vol. 129(C).
    3. Richard S. J. Tol, 2023. "Navigating the energy trilemma during geopolitical and environmental crises," Papers 2301.07671, arXiv.org.
    4. 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).
    5. Manh-Hung Nguyen, 2021. "A Resilient Energy System to Climate change," Post-Print hal-04044554, HAL.
    6. Wang, Hui & Zhang, Yunyun & Lin, Weifen & Wei, Wendong, 2023. "Transregional electricity transmission and carbon emissions: Evidence from ultra-high voltage transmission projects in China," Energy Economics, Elsevier, vol. 123(C).
    7. Chen, Hao & Yan, Haobo & Gong, Kai & Geng, Haopeng & Yuan, Xiao-Chen, 2022. "Assessing the business interruption costs from power outages in China," Energy Economics, Elsevier, vol. 105(C).

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    More about this item

    Keywords

    firm performance; growth; instrumental variables; power outages; Vietnam;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • N55 - Economic History - - Agriculture, Natural Resources, Environment and Extractive Industries - - - Asia including Middle East

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