Power outages, economic cost, and firm performance: Evidence from Ethiopia

The lack of secure and reliable electrical power is a constraint to doing business in developing countries. Industrial firms in developing countries adopt different strategies to cope with deficiencies in electricity supply. This paper employs the World Bank Enterprise Survey data to examine how firms in Ethiopia respond to power outages. The results show that firms in Ethiopia self-generate electricity in response to power outages. Power outages were found to affect firms' productivity negatively, increasing firms' costs by 15% from 2011 to 2015. This effect varied negatively with output level, suggesting that outage is particularly costly for small firms.