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Concessions of infrastructure in Latin America: Government-led renegotiation

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Author Info

  • J. Luis Guasch

    (World Bank and University of California, San Diego, California, USA)

  • Jean-Jacques Laffont
  • Stéphane Straub

    (School of Economics, University of Edinburgh, Edinburgh, UK)

Abstract

This paper analyzes government-led renegotiations in infrastructure concession contracts in Latin America, based on the same sample used in Guasch, Laffont and Straub (2003) to examine firm-led renegotiations. After extending the theoretical framework to a multiple-period context in which both Pareto-improving and rent-shifting renegotiations at the initiative of the government can occur, we develop an original instrumental variable strategy to address the issue of contract endogeneity and derive empirical results. While some of the main insights concerning the importance of having a regulator in place when awarding concessions and the fragility of price cap regulatory schemes are unchanged, significant differences arise with respect to the effect of investment and financing, as well as the corruption variables. We provide evidence that a good regulatory framework is especially important in contexts with weak governance and political opportunism. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jae.987
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 22 (2007)
Issue (Month): 7 ()
Pages: 1267-1294

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Handle: RePEc:jae:japmet:v:22:y:2007:i:7:p:1267-1294

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References

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  1. J. Luis Guasch & Jean-Jacques Laffont & Stephane Straub, 2004. "Renegotiation of Concession Contracts in Latin America," ESE Discussion Papers 103, Edinburgh School of Economics, University of Edinburgh.
  2. Oliver Hart & John Moore, 1985. "Incomplete Contracts and Renegotiation," Working papers 367, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Cecile Aubert & Jean- Jacques Laffont, 2005. "Political renegotiation of regulatory contracts," Game Theory and Information 0506002, EconWPA.
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  9. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
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  11. Guasch, J. Luis & Laffont, Jean-Jacques & Straub, Stephane, 2005. "Infrastructure concessions in Latin America : government-led renegotiations," Policy Research Working Paper Series 3749, The World Bank.
  12. Antonio Estache & J.L. Guasch & Lourdes Trujillo, 2003. "Price caps, efficiency pay-offs and infrastructure contract renegotiation in Latin America," ULB Institutional Repository 2013/44100, ULB -- Universite Libre de Bruxelles.
  13. J. Guasch & Jean-Jacques Laffont & Stéphane Straub, 2006. "Renegotiation of Concession Contracts: A Theoretical Approach," Review of Industrial Organization, Springer, vol. 29(1), pages 55-73, September.
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Citations

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Cited by:
  1. Elisabetta Iossa & David Martimort, 2008. "The Simple Micro-Economics of Public-Private Partnerships," CEIS Research Paper 139, Tor Vergata University, CEIS, revised 15 Feb 2013.
  2. Elisabetta Iossa, 2005. "Delegation of Contracting in the Private Provision of Public Services," The Centre for Market and Public Organisation 05/125, Department of Economics, University of Bristol, UK.
  3. Elizabeth Brubaker, 2011. "A Bridge Over Troubled Waters: Alternative Financing and Delivery of Water and Wastewater Services," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 330, May.
  4. Laetitia Comminges & Arnak Dalalyan, . "Minimax Testing of a Composite null Hypothesis Defined via a Quadratic Functional in the Model of regression," Working Papers 2012-19, Centre de Recherche en Economie et Statistique.
  5. Era Dabla-Norris & Jim Brumby & Annette Kyobe & Zac Mills & Chris Papageorgiou, 2012. "Investing in public investment: an index of public investment efficiency," Journal of Economic Growth, Springer, vol. 17(3), pages 235-266, September.
  6. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2009. "Soft Budgets and Renegotiations in Public-Private Partnerships," Cowles Foundation Discussion Papers 1723, Cowles Foundation for Research in Economics, Yale University.
  7. Iossa, Elisabetta & Martimort, David, 2009. "The Theory of Incentives Applied to the Transport Sector," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
  8. Guasch, Jose Luis & Laffont, Jean-Jacques & Straub, Stéphane, 2006. "Renegotiation of Concession Contracts: a Theoretical Approach," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
  9. Antonio Estache & Jose-Luis Guasch & Atsushi Iimi & Lourdes Trujillo, 2009. "Multidimensionality and Renegotiation: Evidence from Transport-Sector Public-Private-Partnership Transactions in Latin America," Review of Industrial Organization, Springer, vol. 35(1), pages 41-71, September.
  10. Haney, Aoife Brophy & Pollitt, Michael G., 2011. "Exploring the determinants of “best practice” benchmarking in electricity network regulation," Energy Policy, Elsevier, vol. 39(12), pages 7739-7746.
  11. Guasch, J. Luis & Straub, Stphane, 2009. "Corruption and concession renegotiations.: Evidence from the water and transport sectors in Latin America," Utilities Policy, Elsevier, vol. 17(2), pages 185-190, June.
  12. Stéphane Saussier & Carine Staropoli & Anne Yvrande-Billon, 2009. "Public–Private Agreements, Institutions, and Competition: When Economic Theory Meets Facts," Review of Industrial Organization, Springer, vol. 35(1), pages 1-18, September.
  13. Werner Kristjanpoller Rodríguez & John Díaz Antillanca, 2011. "Una nueva estructura de garantías para los bonos chilenos de infraestructura," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 13(25), pages 275-295, July-Dece.
  14. Athias, Laure & Nunez, Antonio, 2008. "The more the merrier? Number of bidders, information dispersion, renegotiation and winner’s curse in toll road concessions," MPRA Paper 10539, University Library of Munich, Germany.
  15. Simon Beck & Thierry Kamionka, 2012. "Who Benefits from Growth ?," Working Papers 2012-18, Centre de Recherche en Economie et Statistique.

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