NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

How Do Electricity Shortages Affect Industry? Evidence from India

Hunt Allcott, Allan Collard-Wexler, Stephen D. O'Connell

NBER Working Paper No. 19977
Issued in March 2014, Revised in August 2015
NBER Program(s):Development Economics, Environment and Energy Economics, Industrial Organization, Productivity, Innovation, and Entrepreneurship

We estimate the effects of electricity shortages on Indian manufacturers, instrumenting with supply shifts from hydroelectric power availability. We estimate that India’s average reported level of shortages reduces the average plant’s revenues and producer surplus by five to ten percent, but average productivity losses are significantly smaller because most inputs can be stored during outages. Shortages distort the plant size distribution, as there are significant economies of scale in generator costs and shortages more severely affect plants without generators. Simulations show that offering interruptible retail electricity contracts could substantially reduce the impact of shortages.

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Document Object Identifier (DOI): 10.3386/w19977

Published: Hunt Allcott & Allan Collard-Wexler & Stephen D. O'Connell, 2016. "How Do Electricity Shortages Affect Industry? Evidence from India," American Economic Review, vol 106(3), pages 587-624. citation courtesy of

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