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 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.

Bibliographic Details

Main Authors:	Straub, Stephane, Andres, Luis, Guasch, Jose Luis
Language:	English
Published:	World Bank, Washington, DC 2007-10
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 https://hdl.handle.net/10986/7564
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