Do Regulation and Institutional Design Matter for Infrastructure Sector Performance?

This paper evaluates the impact of economic regulation on infrastructure sector outcomes. It tests the impact of regulation from three different angles: aligning costs with tariffs and firm profitability; reducing opportunistic renegotiation; and m...

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Bibliographic Details
Main Authors:	Andres, Luis, Guasch, Jose Luis, Straub, Stephane
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ABUSE OF MONOPOLY POWER ARBITRATION ARBITRATION BODY AUCTION AUCTION PROCEDURE AUCTIONS BANK POLICY BARRIER BENEFICIARY BID BUREAUCRATIC QUALITY CHECKS CLAIMANT COMPANY COMPETITIVE PRESSURE CONCESSION CONCESSION CONTRACT CONCESSION CONTRACTS CONCESSION PROJECTS CONSUMER PROTECTION CONTRACT DESIGN CONTRACT RENEGOTIATION CONTRACT RENEGOTIATIONS CONTRACT RENEWAL COST OF CAPITAL COST SAVINGS COSTS OF CAPITAL CURRENCY DEVALUATION DEVELOPING COUNTRIES DEVELOPING ECONOMIES DEVELOPMENT BANK DIVESTITURE DOLLAR PRICES DUMMY VARIABLES ECONOMIC REGULATION ELECTRICITY DISTRIBUTION ELECTRICITY INDUSTRY ELECTRICITY OUTCOMES EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EMPLOYMENT ENFORCEMENT OF CONTRACTS ENTERPRISE PERFORMANCE EXCHANGE RATE EXPANSION FINANCIAL CAPACITY FINANCIAL RETURNS FINANCIAL STATEMENTS FIRM PERFORMANCE FOREIGN FIRMS FOREIGN INVESTORS FOREIGN OWNERSHIP FUTURE PRICES GENERATION GOVERNANCE ARRANGEMENTS GOVERNMENT BUDGET GROSS DOMESTIC PRODUCT GROWTH RATE GROWTH RATES IMPACT OF REGULATION INCOME INDEPENDENT REGULATORS INDEPENDENT REGULATORY INFLATION INFRASTRUCTURE CONCESSIONS INFRASTRUCTURE CONTRACT INFRASTRUCTURE CONTRACT RENEGOTIATION INFRASTRUCTURE CONTRACTS INFRASTRUCTURE INDUSTRIES INFRASTRUCTURE PROJECTS INFRASTRUCTURE SECTOR INFRASTRUCTURE SECTORS INTERNAL RATE OF RETURN INTERNATIONAL BANK INVESTMENT INCENTIVES INVESTMENT REQUIREMENTS JURISDICTION LABOR REDUNDANCY LATIN AMERICAN LEGAL FOUNDATION LEGAL FRAMEWORK LEGAL INSTRUMENT LEVY LOCAL CURRENCY LOCAL INVESTORS MACROECONOMIC DATA MARKET CONDITIONS MARKET DATA MONOPOLIES MONOPOLY OPPORTUNISTIC BEHAVIOR OUTPUT OUTPUTS PERFORMANCE OUTCOMES PRICE ADJUSTMENTS PRICE CAP PRICE CAP REGULATION PRICE CAPS PRICE CRITERIA PRICE FOR WATER PRICE INCREASES PRICE REDUCTIONS PRICE REGULATION PRIVATE FINANCING PRIVATE FIRM PRIVATE INFRASTRUCTURE PRIVATE INFRASTRUCTURE PROJECTS PRIVATE INVESTMENT PRIVATE INVESTMENTS PRIVATE OPERATORS PRIVATE SECTOR PRIVATE SECTOR FINANCING PRIVATE SECTOR PARTICIPATION PRIVATIZATION PRIVATIZATION CONTRACTS PRIVATIZATION PROCESS PRIVATIZATIONS PROVISION OF INFRASTRUCTURE PROVISION OF INFRASTRUCTURE SERVICES PUBLIC ASSETS PUBLIC BUDGET PUBLIC INVESTMENTS PUBLIC SECTOR QUALITY MEASURES QUALITY OF SERVICE QUALITY REGULATION RATE OF RETURN RATE OF RETURN REGULATION RATES OF RETURN REGULATION SCHEMES REGULATOR REGULATORS REGULATORY AGENCY REGULATORY BODIES REGULATORY BODY REGULATORY COMMISSION REGULATORY COMMISSIONS REGULATORY DECISIONS REGULATORY EFFECTIVENESS REGULATORY ENVIRONMENT REGULATORY FRAMEWORK REGULATORY FRAMEWORKS REGULATORY GOVERNANCE REGULATORY GOVERNANCE ARRANGEMENTS REGULATORY IMPLICATIONS REGULATORY INFRASTRUCTURE REGULATORY PROCESS REGULATORY REFORMS REGULATORY REGIME REGULATORY REGIMES REGULATORY REVIEW REGULATORY RISKS REGULATORY RULES REGULATORY STRUCTURE REGULATORY VARIABLES RENEGOTIATION RENEGOTIATION PROCESS RENEGOTIATIONS RETURN REGULATION RISK PREMIUM RISK TRANSFER RULE OF LAW SANITATION SAVINGS SERVICE DISRUPTION SERVICE EXPANSION SERVICE QUALITY SOCIAL COSTS SPONSORS SUSTAINABLE DEVELOPMENT TARIFF REGULATION TELECOMMUNICATIONS TOLL TOLL ROAD TOLL ROAD PROGRAM TRANSFER OF ASSETS TRANSITION PERIODS TRANSPARENCY TRANSPORTATION TRINIDAD AND TOBAGO UNDERLYING ASSETS UTILITIES VOLATILITY WATER CONCESSIONS WATER DISTRIBUTION
Online Access:	http://documents.worldbank.org/curated/en/2007/10/8522916/regulation-institutional-design-matter-infrastructure-sector-performance http://hdl.handle.net/10986/7564

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Summary:	This paper evaluates the impact of economic regulation on infrastructure sector outcomes. It tests the impact of regulation from three different angles: aligning costs with tariffs and firm profitability; reducing opportunistic renegotiation; and measuring the effects on productivity, quality of service, coverage, and prices. The analysis uses an extensive data set of about 1,000 infrastructure concessions granted in Latin America from the late 1980s to the early 2000s. The analysis finds that as the theory indicates, regulation matters. The empirical work here reported shows that in three relevant economic aspects-aligning costs and tariffs; dissuading renegotiations; and improving productivity, quality of service, coverage, and tariffs-the structure, institutions, and procedures of regulation matter. Thus, significant efforts should continue to be made to improve the structure, quality, and institutionality of regulation. Regulation matters for protecting both consumers and investors, for aligning closely financial returns and the costs of capital, and for capturing higher levels of benefits from the provision of infrastructure services by the private sector.

Do Regulation and Institutional Design Matter for Infrastructure Sector Performance?

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