The Impact of Blackout on Manufacturing: Evidences from Iran’s Industrial Plants

Shortage of electric power is a serious issue for production, especially for those that rely more on electricity. In this paper, we investigate the effect of non-distributed electricity (blackout) on Iranian industry. The sources are derived from two undistributed energy data collected from 39 distribution companies and database of industrial plants. The final panel data is from industrial plants during 1385 to 1392. Results indicate that a one percentage point increase in power outage for firms with average electricity share, decreases production and sales by 0.11 and 0.10 percent respectively, which is significant and quite robust. A smaller negative effect is also observed in production factors such as capital, materials, and productivity, but is not significant. The results also show that electricity and fossil fuels are substitutes. For the firms with average electricity share, the use of fossil fuels increases by 0.045 percent in response to a one percentage point increase in power outage.