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Regulating telecommunications in developing countries : outcomes, incentives, and commitment

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  • Galal, Ahmed
  • Nauriyal, Bharat
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    Abstract

    In response to the recent wave ofprivatizing and regulating monopolies in developing countries, the authors evaluate the impact of different regulatory schemes on private sector behavior in the telecommunications sector in seven countries. They find that regulation is most effective - meaning, it results in substantial investment by the private sector, reasonable returns on this investment, and greater productivity - where the government/regulators reduce the firm's information advantage, induce the firm (through pricing) to operate efficiently, and institute safeguarding mechanisms to protect the firm against expropriation of assets or quasi-rents. Conversely, where the government/regulators fail to resolve information, incentive, and commitment problems, private sector returns are relatively high, and investment and productivity are relatively low.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1520.

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    Date of creation: 31 Oct 1995
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    Handle: RePEc:wbk:wbrwps:1520

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    Related research

    Keywords: Economic Theory&Research; Environmental Economics&Policies; Decentralization; International Terrorism&Counterterrorism; Public Sector Economics&Finance; Environmental Economics&Policies; Economic Theory&Research; Public Sector Economics&Finance; Knowledge Economy; Education for the Knowledge Economy;

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    1. Baron, David P & Besanko, David, 1987. "Commitment and Fairness in a Dynamic Regulatory Relationship," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 413-36, July.
    2. Laffont, Jean-Jacques & Tirole, Jean, 1986. "Using Cost Observation to Regulate Firms," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 614-41, June.
    3. David P. Baron, 1988. "Regulation and Legislative Choice," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 467-477, Autumn.
    4. B. Caillaud & R. Guesnerie & P. Rey & J. Tirole, 1988. "Government Intervention in Production and Incentives Theory: A Review of Recent Contributions," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 1-26, Spring.
    5. Riordan, Michael H & Sappington, David E M, 1987. "Awarding Monopoly Franchises," American Economic Review, American Economic Association, vol. 77(3), pages 375-87, June.
    6. Spiller, Pablo T. & Sampson, Cezley I., 1993. "Regulation, institutions and commitment : the Jamaican telecommunications sector," Policy Research Working Paper Series 1362, The World Bank.
    7. Sanford Grossman & Oliver Hart, . "An Analysis of the Principal-Agent Problem," Rodney L. White Center for Financial Research Working Papers 15-80, Wharton School Rodney L. White Center for Financial Research.
    8. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-85, July.
    9. Richard Schmalensee, 1989. "Good Regulatory Regimes," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 417-436, Autumn.
    10. Steven Tadelis & Oliver E.Williamson, 2012. "Transaction Cost Economics
      [The Handbook of Organizational Economics]
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    11. Nalebuff, Barry J & Stiglitz, Joseph E, 1983. "Information, Competition, and Markets," American Economic Review, American Economic Association, vol. 73(2), pages 278-83, May.
    12. Hill, Alice & Abdala, Manuel Angel & DEC, 1993. "Regulation, institutions, and commitment : privatization and regulation in the Argentine telecommunications sector," Policy Research Working Paper Series 1216, The World Bank.
    13. R. Preston McAfee & John McMillan, 1987. "Competition for Agency Contracts," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 296-307, Summer.
    14. Spiller, Pablo T, 1996. "Institutions and Commitment," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 421-52.
    15. Brown, Lorenzo & Einhorn, Michael & Vogelsang, Ingo, 1991. "Toward Improved and Practical Incentive Regulation," Journal of Regulatory Economics, Springer, vol. 3(4), pages 323-38, December.
    16. Esfahani, Hadi Salehi & DEC, 1994. "Regulations, institutions, and economic performance : the political economy of the Philippines'telecommunications sector," Policy Research Working Paper Series 1294, The World Bank.
    17. Oliver Hart & Bengt Holmstrom, 1986. "The Theory of Contracts," Working papers 418, Massachusetts Institute of Technology (MIT), Department of Economics.
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    Cited by:
    1. Patalinghug, Epictetus & Llanto, Gilberto M., 2005. "Competition Policy and Regulation in Power and Telecommunications," Discussion Papers DP 2005-18, Philippine Institute for Development Studies.
    2. Luis Gutierrez, 2002. "Regulatory governance in the latinamerican telecommunications sector," BORRADORES DE INVESTIGACIÓN 003447, UNIVERSIDAD DEL ROSARIO.
    3. Scott Wallsten, 2003. "Of Carts and Horses: Regulation and Privatization in Telecommunications Reforms," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 6(4), pages 217-231.
    4. Siddhartha Mitra & Suman Bery & Gupta D B & Reeta Krishna, 2010. "The Nature of Rural Infrastructure: Problems and Prospects," Working Papers id:2357, eSocialSciences.
    5. Li, Wei & Qiang, Christine Zhen-Wei & Xu, Lixin Colin, 2005. "Regulatory Reforms in the Telecommunications Sector in Developing Countries: The Role of Democracy and Private Interests," World Development, Elsevier, vol. 33(8), pages 1307-1324, August.
    6. Zhang, Yingang & Parker, David & Kirkpatrick, Colin, 2004. "Competition, Regulation and Privatisation of Electricity Generation in Developing Countries: Does the Sequencing of the Reforms Matter?," Centre on Regulation and Competition (CRC) Working papers 30599, University of Manchester, Institute for Development Policy and Management (IDPM).
    7. Anne-Marie Mohammed & Eric Strobl, 2011. "Good Governance and Growth in Developing Countries: A Case Study of Regulatory Reforms in the Telecommunications Industry," Journal of Industry, Competition and Trade, Springer, vol. 11(1), pages 91-107, March.

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