The Review of Economics and Statistics Vol. 99 No. 5 2017
Electricity Cost and Firm Performance: Evidence from India
Abstract
Using data on Indian firms, I provide evidence on how electricity prices affect a firm’s industry choice and productivity growth. I construct an instrument for electricity price as the interaction between coal price and the share of thermal generation in a state’s total electricity generation capacity. I find that in response to an exogenous increase in electricity price, firms switch to less electricity-intensive production processes within narrowly defined industries, reduce their machine intensity, and have lower output and productivity growth rates. Thus, electricity constraints may limit a country’s growth by leading firms to operate in industries with fewer productivity-enhancing opportunities.
- DOI
- 10.1162/rest_a_00641
- Volume
- 99
- Issue
- 5
- Pages
- 839-852
- Language
- en
- Sources
- openalex crossref