Alby, Philippe, Dethier, Jean-Jacques and Straub, Stéphane (2011) Let there be Light! Firms Operating under Electricity Constraints in Developing Countries. TSE Working Paper, n. 11-255

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Many developing countries are unable to provide their industrial sector with reliable electric
power and many enterprises have to contend with insufficient and unreliable electricity
supply. Because of these constraints, enterprises often 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 constraints are present. It then
tests econometrically 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 have non-linear effects according to the natural degree of reliance on electricity
of an industrial sector and on firm size, 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.

Item Type: Monograph (Working Paper)
Language: English
Date: July 2011
Uncontrolled Keywords: Infrastructure, Electricity, Industrial structure
JEL Classification: H54 - Infrastructures; Other Public Investment and Capital Stock
L16 - Industrial Organization and Macroeconomics - Industrial Structure and Structural Change; Industrial Price Indices
L94 - Electric Utilities
Divisions: TSE-R (Toulouse)
Institution: Universite Toulouse 1 Capitole
Site: UT1
Date Deposited: 18 Jan 2012 06:04
Last Modified: 18 Apr 2024 11:48
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