IDEAS home Printed from https://ideas.repec.org/a/eee/joecas/v12y2015i2p110-123.html
   My bibliography  Save this article

Electricity regulation and FDIs spillovers in the OECD: A panel data econometric approach

Author

Listed:
  • Polemis, Michael L.
  • Fafaliou, Irene

Abstract

The aim of this paper is to investigate the regulatory process in the electricity sector and determine the extent to which it has affected the level of Foreign Direct Investments (FDIs). For this purpose, we use an annual data set covering the period 1975–2010 and panel data econometric techniques. Our results suggest a feedback effect between electricity regulation and the attraction of FDIs in the OECD countries. This finding highlights the existence of a sound regulatory environment in the examined electricity sectors, implying that a liberalized and competitive electricity sector can be employed under specific settings by policy makers to attract FDIs. Further, we find a two-way Granger type causation between FDIs and effective regulation in the electricity sector, thus providing sufficient evidence that a proper regulatory environment is a prerequisite for increases in the level of FDIs.

Suggested Citation

  • Polemis, Michael L. & Fafaliou, Irene, 2015. "Electricity regulation and FDIs spillovers in the OECD: A panel data econometric approach," The Journal of Economic Asymmetries, Elsevier, vol. 12(2), pages 110-123.
    • Handle: RePEc:eee:joecas:v:12:y:2015:i:2:p:110-123
    DOI: 10.1016/j.jeca.2015.05.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1703494915000134
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jeca.2015.05.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Del Bo, Chiara F., 2013. "FDI spillovers at different levels of industrial and spatial aggregation: Evidence from the electricity sector," Energy Policy, Elsevier, vol. 61(C), pages 1490-1502.
    2. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    3. Irene Fafaliou & Michael L. Polemis, 2010. "Trends in the European electricity markets: the case of Greece," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 2(5), pages 369-386.
    4. Yin-Fang Zhang & David Parker & Colin Kirkpatrick, 2008. "Electricity sector reform in developing countries: an econometric assessment of the effects of privatization, competition and regulation," Journal of Regulatory Economics, Springer, vol. 33(2), pages 159-178, April.
    5. Kogut, Bruce & Chang, Sea Jin, 1991. "Technological Capabilities and Japanese Foreign Direct Investment in the United States," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 401-413, August.
    6. repec:ces:ifodic:v:4:y:2006:i:3:p:14567469 is not listed on IDEAS
    7. Kalantzis, Fotis & Sakellaris, Kostis, 2012. "Investigating the Impact of the Greek Electricity Market Reforms on its Day-Ahead Market Prices," MPRA Paper 37794, University Library of Munich, Germany.
    8. Robert C. Feenstra & Gordon H. Hanson, 2005. "Ownership and Control in Outsourcing to China: Estimating the Property-Rights Theory of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(2), pages 729-761.
    9. Jaraitė, Jūratė & Di Maria, Corrado, 2012. "Efficiency, productivity and environmental policy: A case study of power generation in the EU," Energy Economics, Elsevier, vol. 34(5), pages 1557-1568.
    10. Bruce A. Blonigen, 2019. "Firm-Specific Assets and the Link Between Exchange Rates and Foreign Direct Investment," World Scientific Book Chapters, in: Foreign Direct Investment, chapter 3, pages 89-120, World Scientific Publishing Co. Pte. Ltd..
    11. Dana Hajkova & Giuseppe Nicoletti & Laura Vartia & Kwang-Yeol Yoo, 2006. "Taxation, Business Environment and FDI Location in OECD Countries," OECD Economics Department Working Papers 502, OECD Publishing.
    12. D. Acemoglu & J. Robinson, 2013. "Economics versus politics: pitfalls of policy advice," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 12.
    13. Johansen, Soren, 1992. "Cointegration in partial systems and the efficiency of single-equation analysis," Journal of Econometrics, Elsevier, vol. 52(3), pages 389-402, June.
    14. Antonio Estache & A. Goicoechea & M. Manacorda, 2006. "Telecommunications Reform and Performance," ULB Institutional Repository 2013/44149, ULB -- Universite Libre de Bruxelles.
    15. Stevens, Guy V. G., 2000. "Politics, economics and investment:: Explaining plant and equipment spending by US direct investors in Argentina, Brazil and Mexico," Journal of International Money and Finance, Elsevier, vol. 19(2), pages 153-183, April.
    16. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
    17. John Cubbin & Jon Stern, 2006. "The Impact of Regulatory Governance and Privatization on Electricity Industry Generation Capacity in Developing Economies," The World Bank Economic Review, World Bank, vol. 20(1), pages 115-141.
    18. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
    19. Mark Armstrong & David E.M. Sappington, 2006. "Regulation, Competition and Liberalization," Journal of Economic Literature, American Economic Association, vol. 44(2), pages 325-366, June.
    20. Desai, Mihir A. & Foley, C. Fritz & Hines, James Jr., 2004. "Foreign direct investment in a world of multiple taxes," Journal of Public Economics, Elsevier, vol. 88(12), pages 2727-2744, December.
    21. Gual, Jordi & Trillas, Francesc, 2003. "Telecommunications policies: Determinants and impact," IESE Research Papers D/510, IESE Business School.
    22. Peter Pedroni, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 653-670, November.
    23. Borenstein, Severin & Bushnell, James, 2000. "Electricity Restructuring: Deregulation or Reregulation?," Competition Policy Center, Working Paper Series qt22d2q3fn, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
    24. Schenker, Nathaniel & Taylor, Jeremy M. G., 1996. "Partially parametric techniques for multiple imputation," Computational Statistics & Data Analysis, Elsevier, vol. 22(4), pages 425-446, August.
    25. Maddala, G S & Wu, Shaowen, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 631-652, Special I.
    26. Rosa Forte & Rui Moura, 2013. "The Effects Of Foreign Direct Investment On The Host Country'S Economic Growth: Theory And Empirical Evidence," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 58(03), pages 1-28.
    27. Angela S. Bergantino & Etienne Billette De Villemeur & Annalisa Vinella, 2011. "Partial Regulation in Vertically Differentiated Industries," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(2), pages 255-287, April.
    28. Estache, Antonio & Goicoechea, Ana & Manacorda, Marco, 2006. "Telecommunications performance, reforms, and governance," Policy Research Working Paper Series 3822, The World Bank.
    29. Michael L. Polemis, 2015. "Does Monopolistic Competition Exist In The Mena Region? Evidence From The Banking Sector," Bulletin of Economic Research, Wiley Blackwell, vol. 67(S1), pages 74-96, December.
    30. Ai, Chunrong & Sappington, David E M, 2002. "The Impact of State Incentive Regulation on the U.S. Telecommunications Industry," Journal of Regulatory Economics, Springer, vol. 22(2), pages 133-159, September.
    31. Mulligan, Casey B. & Tsui, Kevin K., 2015. "Political entry, public policies, and the economy," Research in Economics, Elsevier, vol. 69(3), pages 377-397.
    32. David Sappington, 2005. "Regulating Service Quality: A Survey," Journal of Regulatory Economics, Springer, vol. 27(2), pages 123-154, November.
    33. Antonio Estache & Ana Goicoechea & Marco Manacorda, 2006. "Telecommunications Reform and Performance – A Global View," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 4(3), pages 16-21, October.
    34. Estrin, Saul & Bevan, Alan, 2000. "The Determinants of Foreign Direct Investment in Transition Economies," CEPR Discussion Papers 2638, C.E.P.R. Discussion Papers.
    35. Scott Wallsten, 2004. "Privatizing Monopolies in Developing Countries: The Real Effects of Exclusivity Periods in Telecommunications," Journal of Regulatory Economics, Springer, vol. 26(3), pages 303-320, August.
    36. Pollitt, M.G., 2009. "Electricity Liberalisation in the European Union: A Progress Report," Cambridge Working Papers in Economics 0953, Faculty of Economics, University of Cambridge.
    37. Alan A. Bevan & Saul Estrin, 2000. "The Determinants of Foreign Direct Investment in Transition Economies," William Davidson Institute Working Papers Series 342, William Davidson Institute at the University of Michigan.
    38. Singh, Harinder & Kwang W. Jun, 1995. "Some new evidence on determinants of foreign direct investment in developing countries," Policy Research Working Paper Series 1531, The World Bank.
    39. Guntram Wolff, 2007. "Foreign Direct Investment in the Enlarged EU: Do Taxes Matter and to What Extent?," Open Economies Review, Springer, vol. 18(3), pages 327-346, July.
    40. Severin Borenstein, 2002. "The Trouble With Electricity Markets: Understanding California's Restructuring Disaster," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 191-211, Winter.
    41. Lam, Pun-Lee & Shiu, Alice, 2001. "A data envelopment analysis of the efficiency of China's thermal power generation," Utilities Policy, Elsevier, vol. 10(2), pages 75-83, June.
    42. Paul Conway & Giuseppe Nicoletti, 2006. "Product Market Regulation in the Non-Manufacturing Sectors of OECD Countries: Measurement and Highlights," OECD Economics Department Working Papers 530, OECD Publishing.
    43. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    44. G. S. Maddala & Shaowen Wu, 1999. "A Comparative Study of Unit Root Tests with Panel Data and a New Simple Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(S1), pages 631-652, November.
    45. Wheeler, David & Mody, Ashoka, 1992. "International investment location decisions : The case of U.S. firms," Journal of International Economics, Elsevier, vol. 33(1-2), pages 57-76, August.
    46. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    47. Pedroni, Peter, 1999. "Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-670, Special I.
    48. Mr. Ewe-Ghee Lim, 2001. "Determinants of, and the Relation Between, Foreign Direct Investment and Growth: A Summary of the Recent Literature," IMF Working Papers 2001/175, International Monetary Fund.
    49. Jerry Hausman & Agustin Ros, 2013. "An econometric assessment of telecommunications prices and consumer surplus in Mexico using panel data," Journal of Regulatory Economics, Springer, vol. 43(3), pages 284-304, June.
    50. Crampes, C. & Moreaux, M., 2001. "Water resource and power generation," International Journal of Industrial Organization, Elsevier, vol. 19(6), pages 975-997, May.
    51. Carlo Cambini & Laura Rondi, 2010. "Incentive regulation and investment: evidence from European energy utilities," Journal of Regulatory Economics, Springer, vol. 38(1), pages 1-26, August.
    52. Steven Globerman & Daniel M Shapiro, 1999. "The Impact of Government Policies on Foreign Direct Investment: The Canadian Experience," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 30(3), pages 513-532, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Khan, Muhammad T. & Thopil, George Alex & Lalk, Jorg, 2016. "Review of proposals for practical power sector restructuring and reforms in a dynamic electricity supply industry," Renewable and Sustainable Energy Reviews, Elsevier, vol. 62(C), pages 326-335.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Paleologos, John M. & Polemis, Michael L., 2013. "What drives investment in the telecommunications sector? Some lessons from the OECD countries," Economic Modelling, Elsevier, vol. 31(C), pages 49-57.
    2. Polemis, Michail & Fotis, Panagiotis, 2011. "Gasoline price asymmetries in the Euro Zone," MPRA Paper 32755, University Library of Munich, Germany.
    3. Charalampos Agiropoulos & Michael L. Polemis & Michael Siopsis & Sotiris Karkalakos, 2022. "Revisiting the finance‐growth nexus: A socioeconomic approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 2762-2783, July.
    4. Christos Agiakloglou & Michael Polemis, 2018. "The Impact of Structural Reforms on Telecommunications Performance," Journal of Industry, Competition and Trade, Springer, vol. 18(2), pages 209-222, June.
    5. Irene Fafaliou & Michael Polemis, 2013. "Competitiveness of the Euro Zone Manufacturing: A Panel Data Analysis," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 19(1), pages 45-61, February.
    6. Herzer, Dierk, 2013. "Cross-Country Heterogeneity and the Trade-Income Relationship," World Development, Elsevier, vol. 44(C), pages 194-211.
    7. Polemis, Michael L., 2016. "New evidence on the impact of structural reforms on electricity sector performance," Energy Policy, Elsevier, vol. 92(C), pages 420-431.
    8. Gharehgozli, Orkideh, 2021. "An empirical comparison between a regression framework and the Synthetic Control Method," The Quarterly Review of Economics and Finance, Elsevier, vol. 81(C), pages 70-81.
    9. Hussain, Ammar & Batool, Irem & Akbar, Minhas & Nazir, Marina, 2021. "Is ICT an enduring driver of economic growth? Evidence from South Asian economies," Telecommunications Policy, Elsevier, vol. 45(8).
    10. Liu, Xuyi & Zhang, Shun & Bae, Junghan, 2017. "The nexus of renewable energy-agriculture-environment in BRICS," Applied Energy, Elsevier, vol. 204(C), pages 489-496.
    11. Polemis, Michael L. & Fotis, Panagiotis N., 2013. "Do gasoline prices respond asymmetrically in the euro zone area? Evidence from cointegrated panel data analysis," Energy Policy, Elsevier, vol. 56(C), pages 425-433.
    12. Dehghan Shabani, Zahra & Shahnazi, Rouhollah, 2019. "Energy consumption, carbon dioxide emissions, information and communications technology, and gross domestic product in Iranian economic sectors: A panel causality analysis," Energy, Elsevier, vol. 169(C), pages 1064-1078.
    13. Karikallio, Hanna, 2015. "Cross-commodity Price Transmission and Integration of the EU Livestock Market of Pork and Beef: Panel Time-series Approach," 2015 Conference, August 9-14, 2015, Milan, Italy 211832, International Association of Agricultural Economists.
    14. Sangjoon Jun, 2006. "The Nexus between IT Investment and Banking Performance in Korea," Global Economic Review, Taylor & Francis Journals, vol. 35(1), pages 67-96.
    15. Pedro M. G. Martins, 2010. "Aid Absorption and Spending in Africa: A Panel Cointegration Approach," Working Paper Series 1010, Department of Economics, University of Sussex Business School.
    16. Florian Verheyen, 2015. "The role of non-price determinants for export demand," International Economics and Economic Policy, Springer, vol. 12(1), pages 107-125, March.
    17. Lee Chien-Chiang, 2011. "Does Insurance Matter for Growth: Empirical Evidence from OECD Countries," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-28, June.
    18. Ronald MacDonald & Flávio Vieira, "undated". "A panel data investigation of real exchange rate misalignment and growth," Working Papers 2010_13, Business School - Economics, University of Glasgow.
    19. Ding Nan & Pomi Shahbaz & Shamsheer ul Haq & Muhammad Nadeem & Muhammad Imran, 2023. "The Economies’ Ability to Produce Diversified and Complex Goods to Meet the Global Competition: Role of Gross Value Chain, Institutional Quality, and Human Capital," Sustainability, MDPI, vol. 15(8), pages 1-17, April.
    20. Ramesh Chandra Das & Tonmoy Chatterjee & Enrico Ivaldi, 2022. "Nexus between Housing Price and Magnitude of Pollution: Evidence from the Panel of Some High- and-Low Polluting Cities of the World," Sustainability, MDPI, vol. 14(15), pages 1-18, July.

    More about this item

    Keywords

    Regulation; Foreign direct investments; Electricity sector; OECD countries;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:joecas:v:12:y:2015:i:2:p:110-123. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/the-journal-of-economic-asymmetries/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.