A cross-country analysis of electricity market reforms: Potential contribution of New Institutional Economics
AbstractThe paper explores whether the question of why some countries are able to implement more extensive reforms is closely related to the question of why some countries have better institutions than others. We analyze this question by using an empirical econometric model based on Poisson regression with cross-section data covering 51 states in the US, 13 provinces in Canada and 51 other countries. In the course of the study, we check the validity of three important arguments of New Institutional Economics (NIE) for the power market liberalization process. The first argument is the "path-dependency". To test its impact on the reform progress, we try to explain whether the background of the chairperson of the regulatory agency when reforms started or that of the governor/minister responsible for energy policy at that time has an impact on the subsequent reform progress. The second argument is the impact of "democracy" as an institution on the reform progress. We look at the effect of two important indicators of democracy (i.e., civil liberties and political rights) on the reform progress. The final argument of NIE is about transaction costs. We concentrate on the level of corruption in a country as one of the key factors that determine transaction costs and try to explore its impact on the reforms. The results show that the backgrounds of the chairperson and the minister/governor, the level of democracy and corruption in a country are significantly correlated with how far reforms have gone in that country. The negative relationship between reform progress and civil liberties may indicate that reforms may be limited in democratic countries with strong civil society institutions such as trade unions or other organized structures in the society that may consider reforms as 'harmful' to their self-interest.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 47496.
Date of creation: Sep 2013
Date of revision:
Publication status: Published in Energy Economics 5.39(2013): pp. 239-251
Econometric modeling; Institutions and the macroeconomy; International economics; Electric utilities;
Other versions of this item:
- Erdogdu, Erkan, 2013. "A cross-country analysis of electricity market reforms: Potential contribution of New Institutional Economics," Energy Economics, Elsevier, vol. 39(C), pages 239-251.
- Erdogdu, E., 2012. "A cross country analysis of electricity market reforms: potential contribution of New Institutional Economics," Cambridge Working Papers in Economics 1232, Faculty of Economics, University of Cambridge.
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
- E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
- F5 - International Economics - - International Relations and International Political Economy
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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