# **1 Introduction**

Small firms employ the vast majority of non-agricultural workers and dominate the firm size distribution in developing countries ( **?** ). Many of these firms are composed of a single person, the self-employed owner, for whom the profits of the firm are earned income. While single-person and other small firms face a variety of well-documented barriers to growth,<sup>1</sup> relatively little is known about how they cope with unreliable infrastructure. Power outages, in particular, are pervasive across the developing world and are oft-cited by entrepreneurs themselves as the most detrimental input shortage they face ( **??** ).<sup>2</sup> This study is among the first to analyze the input and output effects of frequent blackouts among microenterprises. Existing studies of the direct firm-level consequences of electricity shortages estimate these effects primarily among large, formal firms, whose input composition differs dramatically from the modal single-person or very small firm. **?** and **?** find that large firms in China and India, respectively, avoid large productivity losses by shifting their input choices: outsourcing the production of intermediate inputs or storing raw materials during outages. The input composition of small firms, in contrast, is primarily labor, which is less substitutable than materials across firms and periods, leaving little reason to suppose that the evidence from large firms on coping strategies applies to microenterprises.

Microenterprises are also unlikely to shift away from grid electricity to costly generators, as many large firms do in Africa, though costs of running a generator often outweigh benefits even for large firms ( **?** ). Recent evidence from Ghana suggests that midsize firms (with an average of six workers) also invest in generators during power crises, though using a generator exacerbates productivity losses by diverting capital away from other inputs ( **?** ). In the sample studied in this paper, only 3% of firms report having access to a generator during the panel data collection period and only a single firm purchased a generator in the year during which the sample was surveyed.

This study also differs from the existing literature in the frequency of the labor input data it exploits. Using high-frequency (daily) data, this paper shows that microenterprises cope with power outages in the short term by shifting labor demand for workers and labor supply of firm owners. In this, it builds on **?** , which presents indirect evidence that electrification enables self-employment in South Africa and **?** , which show that place-based infrastructure grants increase employment in India.

This article studies a period of heavy load shedding and frequent, unpredictable blackouts in March and April of 2015, at the tail end of a three-year power crisis known as _Dumsor_ , or the “Lights Off, Lights

> 1For example, **?** consider access to capital, finding high rates of return to capital in microenterprises in Sri Lanka; **?** show an impact of randomly offered consulting services on the productivity of small firms in Mexico; and **?** present experimental evidence from Ghana that small firms in their context are labor constrained.

> 2The World Bank Enterprise Surveys in Ghana happen to have been collected during two periods of extreme power crisis, in 2007, during the 2006-07 power crisis and in 2013, near the beginning of the 2012-15 Dumsor crisis. As such, their estimates of the firm-level burden of lacking electricity may reflect that particular timing. In the 2013 survey, 61% of firms cite electricity as a major constraint to firm performance, as compared to 43% citing corruption and 62% citing access to finance. This figure is fairly constant across the three major firm size strata (61% for firms of size 5-19 workers, 61% for firms of size 20-99, and 63% for firms of size 100+). Firms in the World Bank sample estimated losses due to electricity outages to be 11.5% of annual revenues.

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