Firms Operating under Electricity Constraints in Developing Countries

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...

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Bibliographic Details
Published in:The World Bank economic review 2013-01, Vol.27 (1), p.109-132
Main Authors: Alby, Philippe, Dethier, Jean-Jacques, Straub, Stéphane
Format: Article
Language:English
Subjects:
Banking
borrower
competitors
Developing countries
Economic models
Electric power
Electricity
Electricity distribution
Electricity generation
employment
entrepreneur
entrepreneurs
firm size
firms
Infrastructure
Investments
LDCs
lender
manufacturer
negative impact
negative impacts
Power supply
private companies
small firm
small firms
Studies
suppliers
Surveys
theory of the firm
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Summary: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.
ISSN:0258-6770
1564-698X
1564-698X
DOI:10.1093/wber/lhs018