Lights Off, Lights On: The Effects of Electricity Shortages on Small Firms

Entrepreneurs in developing countries report that unreliable electricity imposes a serious constraint, yet little evidence exists on how blackouts impact the micro-firms that account for the majority of employment. This article estimates the effects of outages on small firms using original firm-level panel data and finds evidence of differential effects by firm size. Firms without employees experience large reductions in revenues and profits. Outages have no measurable effect on the output of firms with employees, where worker hours increase, weekly wages paid decrease, and the analysis fails to reject the null hypothesis that blackouts have no effect on (average firm-level) worker hourly wages.

Automated summary

The impact of power outages on small firms varies, with firms without employees experiencing significant decreases in revenue and profits while firms with employees see changes in output, worker hours, and weekly wages paid. The analysis does not reject the null hypothesis that blackouts have no effect on worker hourly wages at the average firm level.