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Electricity Sector Reform in Developing Countries: An Econometric Assessment of the Effects of Privatisation, Competition and Regulation

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Author Info
Zhang, Yin-Fang
Kirkpatrick, Colin
Parker, David

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Abstract

Over the last two decades electricity sectors in both developed and developing countries have been subject to restructuring to introduce private capital and increase competition. This has been accompanied by the introduction of new regulatory regimes. Although the effects of such reforms in a number of the developed economies are now well documented, apart from a few case studies, the experience of developing countries is much less well researched. This is important because privatisation, competition and the reform of state regulation are key themes in donor aid programmes, notably of the World Bank. This paper provides an econometric assessment of the effects of privatisation, competition and regulation on the performance of the electricity generation industry using panel data for 51 developing countries, over the period 1985 to 2000. The study identifies the impact of these reforms on generating capacity, electricity generated, labour productivity in the generating sector, capacity utilisation and industrial and residential user prices. The paper concludes that competition appears to bring about favourable results for service penetration, capacity expansion, labour efficiency and prices to industrial users. The effect of privatisation and having an independent regulator, separately, is statistically insignificant except in the case of capacity utilisation and privatisation; while the co-existence of these two reforms does seem to be correlated with greater electricity availability, more generation capacity and higher labour productivity. The main policy conclusions are that on their own privatisation and regulation do not lead to obvious gains in economic performance. When privatising electricity under conditions of monopoly, emphasis should be placed on implementing an effective regulatory framework. By contrast, introducing competition does seem to be effective in stimulating performance improvements, irrespective of changes in ownership or regulation.

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Paper provided by University of Manchester, Institute for Development Policy and Management (IDPM) in its series Centre on Regulation and Competition (CRC) Working papers with number 30593.

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Date of creation: 2002
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Handle: RePEc:ags:idpmcr:30593

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Keywords: Public Economics;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kirkpatrick, Colin & Parker, David & Zhang, Yin-Fang, 2004. "State versus Private Sector Provision of Water Services in Africa: A Statistical, DEA and Stochastic Cost Frontier Analysis," Centre on Regulation and Competition (CRC) Working papers 30604, University of Manchester, Institute for Development Policy and Management (IDPM). [Downloadable!]
  2. Jon Stern & John Cubbin, 2004. "Regulatory Effectiveness: The impact of regulation and regulatory governance arrangements on electricity industry outcomes: a review paper," City University Economics Discussion Papers 04/01, Department of Economics, City University, London. [Downloadable!]
  3. Carlos Pestana Barros & Rui Cunha Marques, 2008. "Performance of European Airports: Regulation, Ownership and Managerial Efficiency," Working Papers 2008/25, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
  4. Jamasb, T. & Pollitt, M., 2007. "Incentive Regulation of Electricity Distribution Networks: Lessons of Experience from Britain," Cambridge Working Papers in Economics 0709, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  5. Kirkpatrick, Colin & Parker, David & Zhang, Yin-Fang, 2004. "Foreign Direct Investment in Infrastructure in Developing Countries: Does Regulation Make a Difference?," Centre on Regulation and Competition (CRC) Working papers 30703, University of Manchester, Institute for Development Policy and Management (IDPM). [Downloadable!]
  6. Estache, Antonio & Goicoechea, Ana & Trujillo, Lourdes, 2006. "Utilities reforms and corruption in developing countries," Policy Research Working Paper Series 4081, The World Bank. [Downloadable!]
    Other versions:
  7. Stern, Jon & Cubbin, John, 2005. "Regulatory effectiveness : the impact of regulation and regulatory governance arrangements on electricity industry outcomes," Policy Research Working Paper Series 3536, The World Bank. [Downloadable!]
  8. Parker, David & Kirkpatrick, Colin & Figueira-Theodorakopoulou, Catarina, 2005. "Infrastructure Regulation and Poverty Reduction in Developing Countries: A Review of the Evidence and a Research Agenda," Centre on Regulation and Competition (CRC) Working papers 30608, University of Manchester, Institute for Development Policy and Management (IDPM). [Downloadable!]
    Other versions:
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