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Privatizing Monopolies in Developing Countries: The Real Effects of Exclusivity Periods in Telecommunications

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  • Wallsten, Scott
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    Abstract

    When reforming their network utility industries, many developing countries give the newly-privatized incumbent exclusive rights to serve a particular market. These "exclusivity periods" are especially common in telecommunications. Research to date has explored the effects of privatization, competition, and to a lesser extent, regulation. We know very little, however, about the effects of the details of privatization transactions themselves and, in particular, how exclusivity periods matter. I use an original, new dataset to explore the costs and benefits of this approach to privatization. I find that exclusivity periods are associated with significant increases in the firm's sale price. The increased revenues to the government come with a cost, however. Exclusivity periods are correlated with a significant decrease in the incumbent's investment in the telecommunications network, payphones, mobile telephone penetration, and international calling.

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    Bibliographic Info

    Paper provided by Regulation2point0 in its series Working paper with number 284.

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    Date of creation: Aug 2003
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    Handle: RePEc:reg:wpaper:284

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    Web page: http://regulation2point0.org/

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    1. Noll, Roger G., 1999. "Telecommunications Reform in Developing Countries," Working paper 527, Regulation2point0.
    2. Li, Wei & Xu, Lixin Colin, 2002. "The Political Economy of Privatization and Competition: Cross-Country Evidence from the Telecommunications Sector," Journal of Comparative Economics, Elsevier, vol. 30(3), pages 439-462, September.
    3. Azam, Jean-Paul & Dia, Magueye & N'Guessan, Tchetche, 2002. "Telecommunications sector reforms in Senegal," Policy Research Working Paper Series 2894, The World Bank.
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    Cited by:
    1. Jones, Siôn & Jones, Pau, 2006. "e-Communications: Investment and the Regulatory Framework," MPRA Paper 3568, University Library of Munich, Germany.
    2. Easterly, William & Irwin, Timothy & Serven, Luis, 2007. "Walking up the down escalator : public investment and fiscal stability," Policy Research Working Paper Series 4158, The World Bank.

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