Power shortage and firm performance: Evidence from a Chinese city power shortage index

Extreme climate events and renewable energy development challenge the reliability of the power supply, which is an important guarantee for high-quality economic development and the production and operation of firms. In this paper, we analyzed the relationship between power shortage and firm productivity by developing a city-level power shortage index in China using the text analysis method. The results indicate that power shortage reduces the probability, quantity, and quality of R&D investment and has a negative impact on the total factor productivity (TFP) of firms. However, it has a smaller negative impact on the TFP of large- and medium-sized firms, export-oriented firms, and state-owned firms than others. Our results are robust to alternative measures of power shortage.