NBER

Stephie Fried

Arizona State University

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Arizona State University

NBER Working Papers and Publications

May 2020Electricity and Firm Productivity: A General-Equilibrium Approach
with David Lagakos: w27081
The lack of reliable electricity in the developing world is widely viewed by policymakers as a major constraint on firm productivity. Yet most empirical studies find modest short-run effects of power outages on firm performance. This paper builds a dynamic macroeconomic model to study the long-run general equilibrium effects of power outages on productivity. The model captures the key features of how firms acquire electricity in the developing world, in particular the rationing of grid electricity and the possibility of self-generated electricity at higher cost. Power outages lower productivity in the model by creating idle resources, by depressing the scale of incumbent firms and by reducing entry of new firms. Consistent with the empirical literature, the model predicts that the short-ru...

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