Power Outages, Its Economic Cost and Firm Performance: Evidence From Ethiopia

The unreliable supply of electricity is the main constraints to doing business in Ethiopia. This paper examined how firms in Ethiopia respond to power outage employing the World Bank Enterprise Survey data. The result shows that, in response to power outages, firms in Ethiopia self-generate electricity. While there is no evidence suggesting outsourcing and improved energy hypothesis, power outages were found to affect the firms’ productivity negatively. From 2011 to 2015 firms’ cost of production rose by 15% due to the power outage. This effect varies positively with output level suggesting that outage is costly particularly for large firms.