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Toward a Theory of Regulation for Developing Countries: Following Jean-Jacques Laffont's Lead

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  • Antonio Estache
  • Liam Wren-Lewis

Abstract

The efficient operation and expansion of infrastructures in developing countries is crucial for growth and poverty reduction. However, recent reforms aimed at improving the performance of these sectors have had limited success. Evidence suggests that, in many instances, this was because the traditional regulatory theory relied on by policymakers was not suitable for the institutional context in developing countries. This article surveys more recent theoretical work focusing on problems with regulation in these countries. At the heart of the survey is the work of Jean-Jacques Laffont, who, in the last decade of his life, set about developing a theoretical framework for regulation in developing countries. We consider the implications of his work, which focused on the key institutional limitations faced in developing countries. We then discuss where experience suggests that there are important omissions from this modeling, bringing in extensions and alternative approaches pursued by other authors. We conclude by summarizing the key ways in which regulatory policy will be different when institutions are weak. Overall, we find that an understanding of the institutional context and its implications are crucial when designing a regulatory framework for developing countries.

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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Literature.

Volume (Year): 47 (2009)
Issue (Month): 3 (September)
Pages: 729-70

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Handle: RePEc:aea:jeclit:v:47:y:2009:i:3:p:729-70

Note: DOI: 10.1257/jel.47.3.729
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Cited by:
  1. Stankov, Petar, 2010. "Deregulation, economic growth and growth acceleration," MPRA Paper 26485, University Library of Munich, Germany.
  2. Guerriero, Carmine, 2011. "Accountability in government and regulatory policies: Theory and evidence," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 453-469.
  3. Dethier, Jean-Jacques & Moore, Alexander, 2012. "Infrastructure in developing countries: An overview of some economic issues," Discussion Papers, University of Bonn, Center for Development Research (ZEF) 123305, University of Bonn, Center for Development Research (ZEF).
  4. Adams, Laurel & Régibeau, Pierre & Rockett, Katharine, 2014. "Incentives to create jobs: Regional subsidies, national trade policy and foreign direct investment," Journal of Public Economics, Elsevier, Elsevier, vol. 111(C), pages 102-119.
  5. Dan Bogart & Latika Chaudhary, 2012. "Regulation, Ownership, and Costs: A Historical Perspective from Indian Railways," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 4(1), pages 28-57, February.
  6. Winters, L. Alan, 2014. "Globalization, Infrastructure, and Inclusive Growth," ADBI Working Papers, Asian Development Bank Institute 464, Asian Development Bank Institute.
  7. Marc Quintyn & Sophia Gollwitzer, 2010. "The Effectiveness of Macroeconomic Commitment in Weak(er) Institutional Environments," IMF Working Papers 10/193, International Monetary Fund.

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