Effects of improving infrastructure quality on business costs: evidence from firm-level data

Atsushi Iimi

No 4581, Policy Research Working Paper Series from The World Bank

Abstract: Economic development is affected by infrastructure services in both volume and quality terms. However, the quality of infrastructure is relatively difficult to measure and assess. The current paper, using firm-level data collected by a business environment assessment survey in 26 countries in Europe and Central Asia, estimates the marginal impacts on firm costs of infrastructure quality. The results suggest that the reliability or continuity of services is important for business performance. Firm costs significantly increase when electricity outages occur more frequently and theaverage outage duration becomes longer. Similarly, increased hours of water supply suspensions also reduce firms'competitiveness. In these countries, it is found that the total benefit for the economy from eliminating the existing electricity outages ranges from 0.5 to 6 percent of gross domestic product. If all water suspensions are removed, the economy could receive a gain of about 0.5 to 2 percent of gross domestic product. By contrast, the quality of telecommunications services seems to have no significant impact.

Keywords: Transport Economics Policy&Planning; Town Water Supply and Sanitation; Private Participation in Infrastructure; Infrastructure Economics; Urban Slums Upgrading (search for similar items in EconPapers)
Date: 2008-03-01
New Economics Papers: this item is included in nep-eff and nep-tra
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Citations: View citations in EconPapers (7)

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