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Macroeconomics effects of private sector participation in Latin America's infrastructure

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  • Trujillo, Lourdes
  • Martin, Noelia
  • Estache, Antonio
  • Campos, Javier

Abstract

The authors provide empirical evidence on the impact that private participation in infrastructure has had on key macroeconomic variables in a sample of 21 Latin American countries from 1985-98. Specifically, they look at the effects on GDP per capita, current public expenditures, public investment, and private investment, controlling for country effects and institutional factors. The authors also investigate the relevance of the specific contractual form of private participation contracts on these variables and show differentiated effects according to contract types. The results suggest that: 1) Private sector involvement in utilities and transport have some, but not impressive, positive effects on GDP per capita. 2) There is some degree of crowding-out of private investment resulting from greenfield projects in utilities, and delayed crowding-in from concessions in transport. 3) There is crowding-in of public investment by private participation in utilities, while there is crowding-out by increased private investment in transport. 4) Private participation in utilities decreases recurrent expenditures, while in transport it results in an increase. The net effect on the public sector account is uncertain, but this uncertainty is a major risk. The revelation of this risk may be the main contribution of this paper since it is inconsistent with the fiscal gains expected by many policymakers as they engage in infrastructure privatization programs.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2906.

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Date of creation: 31 Oct 2002
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Handle: RePEc:wbk:wbrwps:2906

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Keywords: Decentralization; Environmental Economics&Policies; Labor Policies; Health Economics&Finance; ICT Policy and Strategies; Health Economics&Finance; Environmental Economics&Policies; ICT Policy and Strategies; Scientific Research&Science Parks; Science Education;

References

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  1. Bernardo Bortolotti & Marcella Fantini & Domenico Siniscalco, 2001. "Privatisation Around the World: New Evidence from Panel Data," CESifo Working Paper Series 600, CESifo Group Munich.
  2. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
  4. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Governance matters," Policy Research Working Paper Series 2196, The World Bank.
  5. Alberto Alesina & Roberto Perotti, 1993. "Income Distribution, Political Instability, and Investment," NBER Working Papers 4486, National Bureau of Economic Research, Inc.
  6. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
  7. Alicia H. Munnell, 1992. "Policy Watch: Infrastructure Investment and Economic Growth," Journal of Economic Perspectives, American Economic Association, vol. 6(4), pages 189-198, Fall.
  8. Arellano, Manuel, 1993. "On the testing of correlated effects with panel data," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 87-97, September.
  9. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-94, September.
  10. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  11. Gramlich, Edward M, 1994. "Infrastructure Investment: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 32(3), pages 1176-96, September.
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Citations

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Cited by:
  1. Alberto Chong & Florencio Lopez-de-Silanes, 2003. "The Truth About Privatization in Latin America," Research Department Publications 3180, Inter-American Development Bank, Research Department.
  2. Gustavo Ferro & Omar Chisari, 2010. "Tópicos de Economía de la Regulación de los Servicios Públicos," Working Papers hal-00473038, HAL.
  3. Auriol, Emmanuelle & Picard, Pierre M., 2006. "Infrastructure and public utilities privatization in developing countries," Policy Research Working Paper Series 3950, The World Bank.
  4. 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).
  5. Anis Chowdhury, 2012. "Structural Adjustment and Crises –Which Way Now?," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 4(1), pages 85-118, April.
  6. Noelia Martín Morales, 2003. "La privatización de activos desde un punto de vista macroeconómico: evidencia empírica usando un modelo de crecimiento económico para América Latina," Documentos de trabajo conjunto ULL-ULPGC 2003-09, Facultad de Ciencias Económicas de la ULPGC.
  7. Becerril-Torres, Osvaldo U. & Álvarez-Ayuso, Inmaculada C. & Del moral-Barrera, Laura E., 2010. "Do infrastructures influence the convergence of efficiency in Mexico?," Journal of Policy Modeling, Elsevier, vol. 32(1), pages 120-137, January.
  8. Antonio Estache & L. Wren-Lewis, 2008. "Towards a Theory of Regulation for Developing Countries: Following Laffont's Lead," Working Papers ECARES 2008_018, ULB -- Universite Libre de Bruxelles.
  9. Pargal, Sheoli, 2003. "Regulation and private sector investment in infrastructure - evidence from Latin America," Policy Research Working Paper Series 3037, The World Bank.

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