The role of institutional design in the conduct of infrastructure industries reforms - An illustration through telecommunications in developing countries

Recuero Virto, Laura and Gasmi, Farid and Noumba Um, Paul (2009): The role of institutional design in the conduct of infrastructure industries reforms - An illustration through telecommunications in developing countries.

Abstract

This paper discusses the relationship between the quality of political and economic institutions and the performance of the infrastructure industries reform process in developing countries. Our point of departure is that, when thinking about this relationship, it is necessary to take into account the specific features of these countries’ economies (Gasmi and Recuero Virto, 2005, Laffont, 2005). Based on two econometric analysis of time-series-crosssectional data on the telecommunications sector, we present the empirical findings and policy implications pertaining two issues (Gasmi et al., 2006, Gasmi and Recuero Virto, 2007). The first issue concerns the impact of the quality of institutions on the performance of regulation. Our review points to the fact that political accountability of institutional systems is a key determinant of regulatory performance. The second issue relates to the factors that shape the sectorial reforms themselves and the impact on these reforms on the development of the industry. Our main conclusion is that countries’ institutional risk and financial constraints are among the major factors that explain which reforms are actually implemented.

• Item Type: MPRA Paper
• Language: English
• Keywords: Political accountability, reforms, infrastructure industries, developing countries
• Subjects: L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L96 - Telecommunications; L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; H - Public Economics > H1 - Structure and Scope of Government > H11 - Structure, Scope, and Performance of Government; L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L97 - Utilities: General; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C23 - Panel Data Models ; Spatio-temporal Models

References

Arellano, M. and S.R. Bond, 1991, “Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations,” Review of Economic Studies, 58: 277- 97.

—————– and O. Bover, 1995, “Another look at the instrumental variable estimation of error-component models,” Journal of Econometrics, 68: 29-51.

Auriol, E. and P. Picard, 2004, “Privatizations in developing countries and the government’s budget constraint,” Nota di Lavoro 75.2002, Fondazione Eni Enrico Mattei, Corso Magenta 63 - I - 20123 Milano Italy.

Beck, N., Katz, J. and R. Tucker, 1998, “Taking time seriously in binary: Time-series-cross-section analysis with a binary dependent variable,” American Journal of Political Science, 42: 1260-1288.

Cubbin, J. and J. Stern, 2005, “Regulatory effectiveness: The impact of regulation and regulatory governance arrangements on electricity industry outcomes,” World Bank Policy Research Working Paper 3536.

Emerson, P., 2006, “Corruption, competition and democracy,” Forthcoming: Journal of Development Economics, Vol 81(1): 193-212.

Evans, J., Levine, P. and F. Trillas, 2005, “Lobbies, delegation and the under-investment problem in regulation,” Working paper Universidad Aut´onoma de Barcelona.

Fink, C., Mattoo, A. and R. Rathindran, 2002, “An assessment of telecommunications reform in developing countries,” The World Bank Policy Research Working Paper 2909.

Gasmi, F. Laffont, J.J. and W.W. Sharkey, 1998, “Competition, universal service and telecommunications policy in developing countries,” Information Economics & Policy, 12(3): 221-248. 14

Gasmi, F., Noumba, P. and L. Recuero Virto, 2006, “Political accountability and regulatory performance in infrastructure industries: An empirical analysis,” The World Bank Policy Research Paper 4101.

Gasmi, F. and L. Recuero Virto, 2005, “Telecommunications technologies deployment in developing countries-Role of markets and institutions,” Communications & Strategies, 58:19-41.

Gasmi, F. and L. Recuero Virto, 2007, “The determinants of reforms and their impact on telecommunications deployment in developing countries,” IDEI Working Papers 530, Institut d'Économie Industrielle (IDEI), Toulouse.

Gutierrez, L. H., 2003, “The effect of the endogenous regulation on telecommunications expansion and efficiency in Latin America,” Journal of Regulatory Economics, 23: 257-286.

Holtz-Eakin, D., Newey, W. and H.S. Rosen, 1988, “Estimating vector autoregressions with panel data,” Econometrica, 56: 1371-95.

Laffont, J.J., 2005, “Regulation and development,” Cambridge University Press.

Ros, A.J., 1999, “Does network and competition matter? The effects of telecommunications reform on network expansion and efficiency,” The Journal of Regulatory Economics, 15: 62- 92.

————, 2003, “The impact of the regulatory process and price cap regulation in Latin American telecommunications markets,” Review of Network Economics, 2, No 3. National Economic Research Associates Inc. (NERA).

Spiller, P.T. and M. Tommasi, 2003, “The institutions of regulation: An application to public utilities,” Handbook of Telecommunications Economics, Vol 2.

Warlters, M., 2004, “Infrastructure privatization and the marginal cost of public funds,” PhD Dissertation, Toulouse School of Economics.