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The drivers and impacts of water infrastructure reliability – a global analysis of manufacturing firms

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  • Islam, Asif
  • Hyland, Marie

Abstract

Inadequate infrastructure impedes the productivity of manufacturing firms, with negative consequences for the wider economy. This study examines how water infrastructure copes with severe weather fluctuations and analyzes the effect of unreliable water supplies on the productivity of manufacturing firms, focusing predominately on firms in developing economies. This is achieved using firm-level data from World Bank Enterprise Surveys covering over 16,000 manufacturing firms in a cross-section of 103 countries. The study finds that periods of significantly low rainfall lead to higher water outages. The overall impact is driven by the effects of drought on less-developed economies, with economies at higher levels of income benefitting from more resilient water infrastructure. Furthermore, we find that incidents of water outages lead to lower firm productivity for firms in less-developed economies. For the average firm located in a low or lower-middle income economy, one additional water outage incident per day in a typical month can lead to losses of approximately 8.2% of annual sales. This calls for increased policy focus on water infrastructure services, particularly in poorer countries where water infrastructure and firms seem to be particularly vulnerable to the vagaries of rainfall.

Suggested Citation

  • Islam, Asif & Hyland, Marie, 2019. "The drivers and impacts of water infrastructure reliability – a global analysis of manufacturing firms," Ecological Economics, Elsevier, vol. 163(C), pages 143-157.
  • Handle: RePEc:eee:ecolec:v:163:y:2019:i:c:p:143-157
    DOI: 10.1016/j.ecolecon.2019.04.024
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    References listed on IDEAS

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    More about this item

    Keywords

    Water Infrastructure; Drought; Firm productivity; Firm-level analysis;

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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