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Does sequencing matter? regulation and privatization in telecommunications reforms

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  • Wallsten, Scott
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    Abstract

    The question of the most effective order of reforming state-owned enterprises has been hotly debated over the years. In the early 1990s, many western advisers encouraged Eastern European countries, and the former Soviet Union, to privatize firms quickly under the assumption that market institutions would develop once firms were privately owned. The thinking since then has emphasized the importance of establishing an institutional framework conducive to promoting competition before privatizing firms. To date, there has been little empirical work clarifying the debate. The author attempts to address this gap, by examining the effects of the sequence of reform in telecommunications, particularly the effects of establishing a regulatory authority, prior to privatizing incumbent telecommunications firms. Consistent with current thinking, the author finds that countries that established separate regulatory authorities, prior to privatization, saw increased telecommunications investment, fixed telephone penetration, and cellular penetration compared with countries that did not. Moreover, he finds that investors are willing to pay more for telecommunications firms, in countries that established a regulatory authority before privatization. This increased willingness to pay is consistent with the hypothesis that investors require a risk premium to invest, where regulatory rules remain unclear.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2817.

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    Date of creation: 30 Apr 2002
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    Handle: RePEc:wbk:wbrwps:2817

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    Keywords: Trade Finance and Investment; Environmental Economics&Policies; Economic Theory&Research; ICT Policy and Strategies; International Terrorism&Counterterrorism; ICT Policy and Strategies; Economic Theory&Research; Environmental Economics&Policies; Banks&Banking Reform; Administrative&Regulatory Law;

    References

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    1. Roland, Gérard, 1994. "On the Speed and Sequencing of Privatization and Restructuring," CEPR Discussion Papers, C.E.P.R. Discussion Papers 942, C.E.P.R. Discussion Papers.
    2. Wallsten, Scott J, 2001. "An Econometric Analysis of Telecom Competition, Privatization, and Regulation in Africa and Latin America," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 49(1), pages 1-19, March.
    3. Lars-Hendrik Röller & Leonard Waverman, 1996. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," CIG Working Papers, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) FS IV 96-16, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    4. Megginson, William L & Nash, Robert C & van Randenborgh, Matthias, 1994. " The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis," Journal of Finance, American Finance Association, American Finance Association, vol. 49(2), pages 403-52, June.
    5. Wallsten, Scott J, 2001. "Telecommunications Investment and Traffic in Developing Countries: The Effects of International Settlement Rate Reforms," Journal of Regulatory Economics, Springer, Springer, vol. 20(3), pages 307-23, November.
    6. Spiller, Pablo T, 1996. "Institutions and Commitment," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 421-52.
    7. Winston, Clifford, 1993. "Economic Deregulation: Days of Reckoning for Microeconomists," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 31(3), pages 1263-89, September.
    8. Stiglitz, Joseph, 1999. "Promoting Competition in Telecommunications," UADE Working Papers, Instituto de Economía, Universidad Argentina de la Empresa 2_1999, Instituto de Economía, Universidad Argentina de la Empresa.
    9. repec:reg:wpaper:527 is not listed on IDEAS
    10. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 39(2), pages 321-389, June.
    11. Ros, Agustin J, 1999. "Does Ownership or Competition Matter? The Effects of Telecommunications Reform on Network Expansion and Efficiency," Journal of Regulatory Economics, Springer, Springer, vol. 15(1), pages 65-92, January.
    12. Ben A. Petrazzini, 1996. "Competition in Telecoms-Implications for Universal Service and Employment," World Bank Other Operational Studies 11603, The World Bank.
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    Citations

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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, Yale School of Management ysm436, Yale School of Management.
    2. Zhang, Yinfang & Parker, David & Kirkpatrick, Colin, 2005. "Competition, regulation and privatisation of electricity generation in developing countries: does the sequencing of the reforms matter?," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 45(2-3), pages 358-379, May.
    3. Alberto Chong & Virgilio Galdo, 2006. "Streamlining and Privatization Prices in the Telecommunications Industry," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 73(291), pages 461-484, 08.
    4. Iimi, Atsushi, 2007. "Price structure and network externalities in the telecommunications industry : evidence from Sub-Saharan Africa," Policy Research Working Paper Series 4200, The World Bank.
    5. 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.
    6. Alberto Chong & Virgilio Galdo, 2003. "La racionalización y los precios de la privatización en el sector de las telecomunicaciones," Research Department Publications, Inter-American Development Bank, Research Department 4320, Inter-American Development Bank, Research Department.
    7. Pargal, Sheoli, 2003. "Regulation and private sector investment in infrastructure - evidence from Latin America," Policy Research Working Paper Series 3037, The World Bank.
    8. 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.
    9. Fink, Carsten & Mattoo, Aaditya & Rathindran, Randeep, 2002. "An assessment of telecommunications reform in developing countries," Policy Research Working Paper Series 2909, The World Bank.

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