Firms Operating Under Infrastructure and Credit Constraints in Developing Countries: The Case of Power Generators

27 Pages Posted: 20 Apr 2016

See all articles by Philippe Alby

Philippe Alby

affiliation not provided to SSRN

Jean-Jacques Dethier

World Bank

Stéphane Straub

University of Toulouse 1 - Toulouse School of Economics (TSE)

Date Written: December 1, 2010

Abstract

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.

Keywords: Energy Production and Transportation, Microfinance, Climate Change Mitigation and Green House Gases, Private Participation in Infrastructure, Access to Finance

Suggested Citation

Alby, Philippe and Dethier, Jean-Jacques and Straub, Stephane, Firms Operating Under Infrastructure and Credit Constraints in Developing Countries: The Case of Power Generators (December 1, 2010). World Bank Policy Research Working Paper No. 5497. Available at SSRN: https://ssrn.com/abstract=1726246

Philippe Alby

affiliation not provided to SSRN

No Address Available

Jean-Jacques Dethier (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/jdethier

Stephane Straub

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

21 Allée de Brienne
F-31042 Toulouse Cedex, 31000
France
05 61 12 85 37 (Phone)
05 61 12 85 38 (Fax)

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