Powering Up Developing Countries through Integration?

Power market integration is analyzed in a two-country model with nationally regulated firms and costly public funds. If the generation costs between the two countries are too similar, negative business stealing outweighs efficiency gains so that the subsequent integration welfare decreases in both regions. Integration is welfare enhancing when the cost difference between two regions is large enough. The benefits from export profits increase the total welfare in the exporting country, whereas the importing country benefits from lower prices. In this case, market integration also improves incentives to invest compared to autarky. The investment levels remain inefficient, however, especially for transportation facilities. Free riding reduces incentives to invest in these public-good components of the network, whereas business stealing tends to decrease the capacity to finance new investment.

Bibliographic Details

Main Authors:	Auriol, Emmanuelle, Biancini, Sara
Language:	English en_US
Published:	World Bank, Washington, DC 2013-06
Subjects:	ADVANCED ECONOMIES, ADVERSE EFFECT, ADVERSE IMPACT, ALTERNATIVE INVESTMENT, ARBITRATION, ASYMMETRIC INFORMATION, BANK POLICY, BENCHMARK, BUDGET CONSTRAINT, CAPACITY BUILDING, CLAIMANT, CLOSED ECONOMY, COMMODITIES, COMMON MARKET, COMPETITION FOR MARKET, COMPETITIVE FRINGE, CONFLICT OF INTEREST, CONSUMER SURPLUS, CONSUMERS, COORDINATION FAILURE, COST FUNCTIONS, COST REDUCTION, DEBT, DEMAND FUNCTION, DEMAND FUNCTIONS, DEREGULATION, DERIVATIVE, DEVELOPING COUNTRIES, DEVELOPMENT AGENCY, DEVELOPMENT ASSISTANCE, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DISPUTE RESOLUTION, DIVIDENDS, DOMESTIC MARKET, DUMPING, DUOPOLY, ECONOMIC INTEGRATION, ECONOMIC SYSTEMS, ECONOMIC THEORY, ECONOMIES OF SCALE, ELASTICITY, ELASTICITY OF DEMAND, ENERGY RESOURCES, EQUILIBRIUM, EQUILIBRIUM PRICE, EXISTING INFRASTRUCTURE, EXPORTERS, EXPROPRIATION, EXTERNALITIES, FINANCIAL CRISIS, FINANCIAL SUPPORT, FIXED INVESTMENT, FOREIGN FIRM, FOREIGN FIRMS, FOREIGN MARKET, FREE TRADE, FREE TRADE AGREEMENT, GLOBAL INVESTMENT, GLOBALIZATION, GOVERNMENT BUDGET, HOLDINGS, IMPERFECT COMPETITION, IMPORT QUOTAS, INCOME, INCOME LEVELS, INDEBTED COUNTRIES, INEFFICIENCY, INFRASTRUCTURE DEVELOPMENT, INFRASTRUCTURE INVESTMENT, INFRASTRUCTURE PROJECTS, INFRASTRUCTURES, INSTRUMENT, INTERNATIONAL BANK, INTERNATIONAL ECONOMICS, INTERNATIONAL TRADE, INVESTING, INVESTMENT CHOICE, INVESTMENT CHOICES, INVESTMENT REQUIREMENT, JURISDICTION, JUSTICE SYSTEMS, LESS DEVELOPED COUNTRIES, LOW-INCOME COUNTRIES, MARGINAL COST, MARGINAL COST PRICING, MARGINAL COSTS, MARKET ECONOMIES, MARKET INTEGRATION, MARKET POWER, MARKET SHARE, MARKET SHARES, MARKET SIZE, MARKET SIZES, MARKET STRUCTURE, MONOPOLY, NATURAL RESOURCES, OLIGOPOLISTIC MARKETS, OLIGOPOLY, OPEN ECONOMY, OPEN MARKET, OPPORTUNITY COST, OPTIMAL INVESTMENT, PARTICIPATION CONSTRAINT, POLITICAL ECONOMY, POSITIVE EXTERNALITIES, POTENTIAL INVESTORS, PRIVATIZATION, PRODUCTION COSTS, PROPERTY RIGHTS, PUBLIC DEBT, PUBLIC FUND, PUBLIC FUNDS, PUBLIC GOOD, PUBLIC OWNERSHIP, PUBLIC UTILITIES, RAMSEY PRICE, REDISTRIBUTIVE EFFECTS, REGIONAL INTEGRATION, REGIONAL POWER, REGULATOR, REGULATORS, REGULATORY AUTHORITY, REGULATORY BODIES, REGULATORY BODY, RESERVE, RULE OF LAW, SALES, SHADOW PRICE, SHAREHOLDERS, SMALL COUNTRY, SOCIAL COST, SUSTAINABLE INVESTMENT, TARIFF REVENUES, TAX, TAX RATE, TAX RATES, TAX STRUCTURE, TAXATION, TRADE LIBERALIZATION, TRADING, TRADING MARKET, TRANSACTION, TRANSACTION COSTS, TRANSITION ECONOMIES, TRANSPORT, TRANSPORT CHARGES, TRANSPORTATION, TRANSPORTATION COST, TRANSPORTATION COSTS, TRANSPORTATION FACILITIES, TRANSPORTATION INFRASTRUCTURE, TRUE, UNIFORM PRICE, VALUATION, VARIABLE COST, WORLD DEVELOPMENT INDICATORS, electricity, investment, regulation,
Online Access:	http://documents.worldbank.org/curated/en/2013/06/17888008/powering-up-developing-countries-through-integration https://hdl.handle.net/10986/15852
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