Firms Operating under Infrastructure and Credit Constraints in Developing Countries : The Case of Power Generators
Many developing countries are unable to provide their industrial sector with reliable power and many enterprises have to contend with electricity that is insufficient and of poor quality. Because of these constraints, firms in developing countries...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20101208091027 http://hdl.handle.net/10986/3981 |
| Summary: | Many developing countries are unable to
provide their industrial sector with reliable power and many
enterprises have to contend with electricity that is
insufficient and of poor quality. Because of these
constraints, firms in developing countries opt for
self-generation even though it is widely considered a second
best solution. This paper develops a theoretical model of
investment behavior in remedial infrastructure when physical
and credit constraints are present. It then tests
econometrically some implications from this model using a
large sample of enterprises from 87 countries from the World
Bank Enterprise Survey Database. After showing that these
constraints interact and have non-linear effects depending
on the industrial sector's degree of reliance on
electricity and size of firms, the paper draws
differentiated policy recommendations. Credit constraints
appear to be the priority in sectors very reliant on
electricity to spur entry and convergence to the
technological frontier, while in other sectors, firms would
benefit more widely from marginal improvements in electrical supply. |
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