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Winners and losers from utility privatization in Argentina : lessons from a general equilibrium model

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  • Chisari, Omar
  • Estache, Antonio
  • Romero, Carlos

Abstract

The authors assess the macroeconomic and distributional effects of the privatization that Argentina began in 1989 in gas, electricity, telecommunications, and water and sanitation. Using a computable general equilibrium model, they track the effects of the changes observed between 1993, the first year by which all the major privatizations had taken place, and 1995, the most recent year for which data are available. In an innovative use of the model, they also assess the importance of the regulator in determining the distribution of gains and losses from utility privatization among sectors and income groups. They conclude that when regulators are effective, the annual gains from the private operation of utilities are about $3.3 billion, or 1.25 percent of GDP, and that all income classes benefit. Ineffective regulation cuts the gains from the reform by $1 billion or 0.35 percent of GDP. This cut in gains represents an implicit tax of 16 percent on the average consumer, paid directly to the owner of the utility rather than to the government. For the poorest income classes, thisimplicit tax is about 20 percent, meaning that good regulation is in the interest of the poor. The authors also show that the privatization of utilities cannot be blamed for the significant increase in unemployment observed in Argentina since 1993. Effective regulation can lead to a decline in unemployment, and ineffective regulation leads to only a small increase in unemployment. But the gains from utility privatization were not sufficient to offset the negative efficiency and distributional impact on the economy of the Tequila effect, which increased unemployment dramatically by limiting access to credit for users and producers alike.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1824.

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Date of creation: 30 Sep 1997
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Handle: RePEc:wbk:wbrwps:1824

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Keywords: Environmental Economics&Policies; Economic Theory&Research; Labor Policies; Banks&Banking Reform; International Terrorism&Counterterrorism; Environmental Economics&Policies; Economic Theory&Research; Banks&Banking Reform; Public Sector Economics&Finance; Health Economics&Finance;

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Cited by:
  1. Alberto Chong & Florencio de, 2003. "The Truth about Privatization in Latin America," Yale School of Management Working Papers ysm436, Yale School of Management.
  2. Checchi, Daniele & Florio, Massimo & Carrera, Jorge, 2005. "Privatization Discontent and Its Determinants: Evidence from Latin America," IZA Discussion Papers 1587, Institute for the Study of Labor (IZA).
  3. Paul L. Joskow, 2003. "Electricity Sector Restructuring And Competition - Lessons Learned," Working Papers 0314, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  4. Andres, Luis & Guasch, Jose Luis & Azumendi, Sebastian Lopez, 2008. "Regulatory governance and sector performance : methodology and evaluation for Electricity distribution in Latin America," Policy Research Working Paper Series 4494, The World Bank.
  5. Pollitt, M.G., 2004. "‘Electricity Reform in Argentina: Lessons for Developing Countries’," Cambridge Working Papers in Economics 0449, Faculty of Economics, University of Cambridge.
  6. Martín Gonzalez-Eiras & Martín A. Rossi, 2007. "El impacto de la privatización del sector eléctrico en la salud pública," Research Department Publications 3229, Inter-American Development Bank, Research Department.
  7. Emilie Laffiteau & Jean-Marc Montaud, 2005. "Currency Board et ajustements macroéconomiques : les leçons de l’expérience argentine," Documents de travail 120, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV.
  8. Yin-Fang Zhang & David Parker & Colin Kirkpatrick, 2008. "Electricity sector reform in developing countries: an econometric assessment of the effects of privatization, competition and regulation," Journal of Regulatory Economics, Springer, vol. 33(2), pages 159-178, April.
  9. Martín Gonzalez-Eiras & Martín Rossi, 2007. "The Impact of Electricity Sector Privatization on Public Health," IDB Publications 40118, Inter-American Development Bank.
  10. Eduardo Lora & Mauricio Olivera, 1998. "Políticas macro y problemas del empleo en América Latina," Research Department Publications 4117, Inter-American Development Bank, Research Department.
  11. Clive Harris, 2003. "Private Participation in Infrastructure in Developing Countries : Trends, Impacts, and Policy Lessons," World Bank Publications, The World Bank, number 15124, October.
  12. Jamasb, T. & Newbery, D. & Pollitt, M., 2004. "'Core Indicators for Determinants and Performance of Electricity Sector in Developing Countries’," Cambridge Working Papers in Economics 0438, Faculty of Economics, University of Cambridge.
  13. Eduardo Lora & Mauricio Olivera, 1998. "Macro Policy and Employment Problems in Latin America," IDB Publications 6438, Inter-American Development Bank.
  14. Philippe Marin, 2009. "Public-Private Partnerships for Urban Water Utilities : A Review of Experiences in Developing Countries," World Bank Publications, The World Bank, number 2703, October.
  15. Jamasb, Tooraj & Mota, Raffaella & Newbery, David & Pollitt, Michael, 2005. "Electricity sector reform in developing countries : a survey of empirical evidence on determinants and performance," Policy Research Working Paper Series 3549, The World Bank.
  16. Andres, Luis & Foster, Vivien & Guasch, Jose Luis, 2006. "The impact of privatization on the performance of the infrastructure sector : the case of electricity distribution in Latin American countries," Policy Research Working Paper Series 3936, The World Bank.
  17. Kikeri, Sunita & Nellis, John, 2002. "Privatization in competitive sectors : the record to date," Policy Research Working Paper Series 2860, The World Bank.

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