The Effect of Generator Ownership on Firm Productivity during Power Outages in East Africa

Unreliable electricity supply is a widespread problem in developing countries and past studies suggest a negative effect of power outages on firm performance. However, there has been relatively little research on how generator ownership might mitigate these negative effects and when the acquisition of generators is profitable for firms. This paper examines the impact of power outages on firm productivity in East Africa considering the effect of generator ownership in general and during blackouts. Using data from the World Bank Enterprise Survey, I find a negative impact of power outages on total factor productivity and a mitigating effect of self-generating during power outages of approximately the same size. Furthermore, I find that self-generating in general reduces productivity due to the idle capital effect of unused generators during blackout-free times. These results emphasize the potential negative impact of unreliable power supply as well as the mitigating effect of self-generating while highlighting that self-generation is only profitable to firms if the experienced blackouts are severe enough