Abstract
Many developing countries are unable to provide their industrial sectors with reliable electric power, with the result that many enterprises must contend with an insufficient and unreliable supply of electricity. Because of these constraints, enterprises often opt for self-generation of electricity even though it is widely considered a second-best solution. This paper develops a theoretical model of investment behavior in remedial infrastructure in the presence of physical constraints. It then illustrates the model's predictions using a large cross-country sample of enterprises from the World Bank Enterprise Survey database. Electricity-intensive sectors in high-outage countries are characterized by a significantly lower share of small firms.
Keywords
Infrastructure; Electricity; Industrial structure;
JEL codes
- H54: Infrastructures • Other Public Investment and Capital Stock
- L94: Electric Utilities
- L16: Industrial Organization and Macroeconomics: Industrial Structure and Structural Change • Industrial Price Indices
Replaces
Philippe Alby, Jean-Jacques Dethier, and Stéphane Straub, “Let there be Light! Firms Operating under Electricity Constraints in Developing Countries”, TSE Working Paper, n. 11-255, July 2011.
Reference
Philippe Alby, Jean-Jacques Dethier, and Stéphane Straub, “Firms Operating under Electricity Constraints in Developing Countries?”, The World Bank Economic Review, vol. 27, n. 1, 2013, pp. 109–132.
Published in
The World Bank Economic Review, vol. 27, n. 1, 2013, pp. 109–132