Firms' Investment under Financial and Infrastructure Constraints: Evidence from In-House Generation in Sub-Saharan Africa

Jevgenijs Steinbuks

The B.E. Journal of Economic Analysis & Policy, 2012, vol. 12, issue 1, 34

Abstract: While it is well known that financing and infrastructure constraints negatively affect economic development, the correlations between these constraints have been underexplored in the economics literature. This paper focuses on the implications of financing and infrastructure constraints by studying firms’ investments in electric generators as a response to public power interruptions. A theoretical model demonstrates that financial constraints lower economic returns on owning electric generators, making firms less likely to install private generators if the public power supply becomes unreliable. The empirical results show that, controlling for other factors, firms with a lower cost of external financing are more likely to own private generators in areas where the public power supply is less reliable. Observed correlations among reliability of power supply, financial constraints, and investment in electric generators thus appear consistent with the hypothesis that underdeveloped financial markets and inadequate infrastructure can be a greater barrier for economic development than either of these constraints separately.

Keywords: financing constraints; electric generators; infrastructure; Sub-Saharan Africa (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://doi.org/10.1515/1935-1682.3112 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejeap:v:12:y:2012:i:1:n:46

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejeap/html

DOI: 10.1515/1935-1682.3112

Access Statistics for this article

The B.E. Journal of Economic Analysis & Policy is currently edited by Hendrik Jürges and Sandra Ludwig

More articles in The B.E. Journal of Economic Analysis & Policy from De Gruyter
Bibliographic data for series maintained by Peter Golla ().