Publication: Effects of Improving Infrastructure Quality on Business Costs : Evidence from Firm-Level Data in Eastern Europe and Central Asia
Abstract
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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Publication Effects of Improving Infrastructure Quality on Business Costs : Evidence from Firm-Level Data(World Bank, Washington, DC, 2008-03)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 the average 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.Publication Services Inputs and Firm Productivity in Sub-Suharan Africa: Evidence from Firm-Level Data(2008)This paper investigates the relationship between the productivity of African manufacturing firms and their access to services inputs. We use data from the World Bank Enterprise Survey for over 1,000 firms in ten Sub-Saharan African countries to calculate the total factor productivity of firms. The Enterprise Surveys also contain unique measures of firms' access to communications, electricity and financial services. The availability of these measures at the firm level, both as subjective and objective indicators, allows us to exploit the variation in services performance at the sub-national regional level. Furthermore, by using the regional variation in services performance, we are also able to address concerns about the possible endogeneity of the services variables. Our results show a significant and positive relationship between firm productivity and service performance in all three services sectors analysed. The paper thus provides support for the argument that improvements in services industries contribute to enhancing the performance of downstream economic activities, and thus are an essential element of a strategy for promoting growth and reducing poverty.Publication Nonresidential Demand for Energy and Technical Inefficiency in Southeastern Europe: Evidence from Firm-Level Data(2010)Recent volatility in international energy prices has revealed Southeastern Europe as one of the most vulnerable regions to such external shocks. Under the current global economic downturn, in addition, the region's energy-intensive industries are faced with the challenge of weakening demand for their outputs. This paper casts light on the relation between the price and demand for energy. Based on firm-level data, it shows that the price elasticity of industrial energy demand is about -0.4 on average. There are a number of data issues in interpreting the results correctly, but Albania and Macedonia are systematically found to have a relatively elastic demand for energy on the order of -0.7 to -0.8. In these countries, therefore, price adjustments would be one of the effective policy options to balance demand with supply during the period of energy crisis. In other countries, the demand response would be much weaker; pricing cannot be the only solution. Other policy measures, such as facilitation of firm energy efficiency and improvements in the quality of infrastructure services, may be required.Publication Technology Adoption and the Investment Climate : Firm-Level Evidence for Eastern Europe and Central Asia(World Bank, Washington, DC, 2008-09)The international diffusion of technology presents an opportunity for developing economies distant from the world technological frontier to reduce their income gap relative to advanced economies. It is therefore crucial to understand why, when faced with similar technological alternatives different firms in different countries choose to adopt different vintages of capital. This paper examines technology adoption across firms in Eastern Europe and Central Asia. The findings show that access to complementary inputs - managerial capacity, skilled labor, finance, and good infrastructure - and to international knowledge - through foreign direct investment or exports - is an important correlate of technology adoption. The link between market incentives and technology adoption is more nuanced. Although consumer pressure results in technology adoption, competitor pressure does not, suggesting that only firms with rents are able to adopt technology given substantial resource constraints. Privatized firms exhibit better technology adoption outcomes but only when a clear private owner with a profit incentive is present. Better governance is associated with technology adoption only in the countries that joined the European Union in 2004. Future increases in technology adoption by firms in the region will require complementary reforms of the investment climate.Publication Estimating Road Freight Transport Costs in Eastern Europe and Central Asia Using Large Shipping Data(World Bank, Washington, DC, 2023-08-02)The recent global crises, such as the COVID-19 crisis, remind us of the importance of efficient transportation and logistics. Notably, however, even before the crises, some regions were already experiencing a gradual increase in freight costs, with more and more empty trucks observed. The paper recasts light on the question of how road freight costs are determined using large, unique shipping data from Eastern European and Central Asian countries. It finds that economies of scale are significant in both freight weight or load factor and distance. The elasticity with respect to freight weight is particularly high at about 0.3 to 1.0 in absolute terms. Thus, to contain trucking costs, it is important to maximize the load factor through freight consolidation at origins and destinations. The elasticity with respect to distance is relatively modest at 0.04 to 0.16 in absolute terms but still statistically significant, indicating that distance may not necessarily be a constraint on trade and regional integration. Trucking costs also decrease with driving speed, a proxy for efficiency of movements or road conditions. The elasticity is significant for food products (−0.03) and other consumer goods (−0.11). Finally, the paper finds that border crossing adds 3–4 percent to freight costs.
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