Power outages and productivity in manufacturing sector

Official URL: http://risc01.sabanciuniv.edu/record=b1630634 (Table of Contents)

This paper examines the possible effects that the power outages might have on the manufacturing sector in ten emerging countries including Turkey. The firm level data used here is retracted from the Enterprises Survey of World Bank and covers the period between the years 2006 and 2013. Ordinary Least Squares (OLS) and Two Staged Least Squares (2SLS) models have been adopted in the regression analysis of the cross-sectional and country based data. Our findings indicate that for ten countries – namely Turkey, Poland, Mexico, Romania, Hungary, Jordan, Brazil, Albania, Bosnia and Bulgaria – in the list of upper-middle income countries by the World Bank, power outages have a significantly negative effect on the respective country’s firm level productivity. Specifically, we find that the firms experiencing power outages has productivity level 1.2 percent lower by using 2SLS model. Additionally, we also find that one additional power outage costs a 0.7 percent decrease in the firm’s productivity level. Lastly, the average productivity difference between the firms those with a stable generator and non-owners is around 19 percent. These findings suggest that in leading growth and yielding employment opportunities, it is crucial to lower the power outages and improve infrastructural quality.