ESSAYS ON BUSINESS ENVIRONMENT AND FIRM PERFORMANCE

Firm performance is central to economic growth of developing economies. However, it is affected by the business environments in which a firm operates. These business environments includes: features of legal and regulatory services, infrastructures, financial and institutional systems of the country. A burgeoning literature within development economics seeks to understand the constraints that a firm face and strategies to cope with these problems. However, a rigorous empirical study that informs policy makers and concerned development institutions is still lacking especially in Sub-Sahara African countries where the problem is severe. Thus, this thesis focused on examining the impact of business environment on firm performance and how firms respond to poor business environment. The study mainly focused on examining the impact of poor electricity supply, its economic cost and how firms responds to a poor power supply. The thesis is organized in two chapters. The first chapter \u201cpower outages, economic cost and firm performance: Evidence from Ethiopia\u201ddeals with how firms in Ethiopia respond to power interruptions and estimating the economic cost of power outages using two rounds of firm-level survey data. The study employed the World Bank Enterprise Survey (WBES) data collected from firms operating in Ethiopia during 2011 and 2015. The result shows that firms in Ethiopia self-generate electricity in response to power outages. Power outages were found to affect firms\u2019 productivity negatively, increasing firms\u2019 costs by 15% from 2011 to 2015. This effect varied negatively with output level, suggesting that power outages is particularly costly for small firms. This chapter is a single authored paper and published in the Journal of Utilities Policy (53) 111-120. The article can be accessed from: https://doi.org/10.1016/j.jup.2018.06.009. The second chapter \u201cfirm performance under infrastructure constraint: evidence from Sub-Saharan African firms\u201d deals with the role of investment in self-generation in mitigating outage loss and evaluating the outage loss differential between firms that invested in self-generation and those that didn't. Using the WBES data collected from firms operating in 13 Sub-Saharan African countries, the study provided an evidence that though self-generation has helped firms reduce outage loss, firms that have invested in self-generation continue to face higher unmitigated outage loss compared to firms without such investment. In spite of this, firms that have invested in self-generation would have incurred 36%-99% more than their current outage loss if they didn't engage in self-generation while firms that didn't invest in self-generation would have reduced their outage loss by 2% - 24% if they had engaged in self generation. This chapter is also a single-authored paper. Given the above result, the study proposed a differential supply interruption to be followed by public authorities based on firms' degree of vulnerability. Stating differently, firms whose operation are more vulnerable to power outages should get preferential power supply advantage. This could be possible by arranging a binding contract between a vulnerable firms and power companies, so that power companies charge an optimal tariff for supplying secure power for vulnerable firms. In turn, firms should be compensated if the power companies fail to do so. This helps vulnerable firms expand their production without fearing the risk of power outage

Households’ Willingness to Pay for Improved Water Supply : Application of the Contingent Valuation Method; Evidence from Jigjiga Town, Ethiopia

Water problem in developing countries like Ethiopia is twofold: low coverage levels and poor quality that require urgent attention to reduce associated health and social consequences. Understanding this fact, the government and NGOs are currently carrying out several activities to improve the coverage and quality of water supply. To this end, willingness to pay of households that are expected to be benefited from the project should be analysed. The central objective of this study is, hence, to estimate Willingness to Pay (WTP) of households for better-quality water service provision and identify its determinants by using Contingent Valuation Method (CVM) in Jigjiga city. We estimate Willingness to Pay (WTP) for better quality of water supply service on cross-sectional survey of households in Jigjiga city taking 210 sample households randomly drawn. The highest relative WTP for improved water supply service was found in the city with the highest percentage of respondents being unsatisfied with the current water supply both in terms of quality and quantity. Response to the hypothetical scenario shown that sampled households stated that their mean WTP of 94 cents per 20 litres. The results of logit model revealed that household income, family size, water source, age of the respondent and bid value have significant effects on WTP for improved water service provision. The implication is that it is better take into account the socio-economic characteristics of the households in planning and designing water supply projects, which may serve to set rigorous demand oriented projects that can sustain the service delivery