The Effect of Power Outage on Micro and Small Enterprise Productivity: Evidence from Urban Ethiopia

Abstract

For this study, we conducted a cross-sectional survey of 8174 micro, small and medium enterprises from ten major urban areas in Ethiopia to study the effect of power outage on their total factor productivity (TFP), labor productivity and revenue. Our results found that a one percent increase in the average duration of power outage is associated with 0.54%, 0.17%, and 0.19%, decrease in TFP, labor productivity and revenue, respectively. These results are consistent with previous studies in other sub-Saharan African countries and Asia. They suggest that power outage serves as a negative shock to productivity and revenue of enterprises by creating a constraint on production process. They also imply that providing sustainable and reliable power should be taken as a top priority in order to improve the overall performance of micro, small and medium enterprises.