Effects of Improving Infrastructure Quality on Business Costs : Evidence from Firm-Level Data in Eastern Europe and Central Asia

Public infrastructure is one of the important determinants of economic growth. Not only access to but also quality of infrastructure affects firm productivity as well as people's livelihood. Frequent interruptions of the infrastructure-service supply impose extra backup costs on enterprises, hinder their timely business activities, and result in large losses of sales opportunities. This paper focuses on the impacts of improving the quality of public utilities (electricity, water supply, and telecommunications), using firm-level data from 26 transition economies in Eastern Europe and Central Asia. The results suggest that firm costs would significantly increase when electricity outages occur frequently and the outage duration becomes longer. Similarly, when more time is required to restore suspended water supply, firms' competitiveness would be weakened. Not surprisingly, the impacts tend to vary depending on industry. The construction, manufacturing, and hotel and restaurant sectors are found particularly vulnerable.

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Bibliographic Details
Main Author: Iimi, Atsushi
Format: Journal Article biblioteca
Language:EN
Published: 2011
Subjects:National Government Expenditures and Related Policies: Infrastructures, Other Public Investment and Capital Stock H540, Firm Performance: Size, Diversification, and Scope L250, Industrialization, Manufacturing and Service Industries, Choice of Technology O140, Socialist Systems and Transitional Economies: Factor and Product Markets, Industry Studies, Population P230,
Online Access:http://hdl.handle.net/10986/5865
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Summary:Public infrastructure is one of the important determinants of economic growth. Not only access to but also quality of infrastructure affects firm productivity as well as people's livelihood. Frequent interruptions of the infrastructure-service supply impose extra backup costs on enterprises, hinder their timely business activities, and result in large losses of sales opportunities. This paper focuses on the impacts of improving the quality of public utilities (electricity, water supply, and telecommunications), using firm-level data from 26 transition economies in Eastern Europe and Central Asia. The results suggest that firm costs would significantly increase when electricity outages occur frequently and the outage duration becomes longer. Similarly, when more time is required to restore suspended water supply, firms' competitiveness would be weakened. Not surprisingly, the impacts tend to vary depending on industry. The construction, manufacturing, and hotel and restaurant sectors are found particularly vulnerable.