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Regulatory governance and sector performance : methodology and evaluation for Electricity distribution in Latin America

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Author Info
Azumendi, Sebastian Lopez
Guasch, Jose Luis
Andres, Luis
Abstract

This paper contributes to the literature that explores the link between regulatory governance and sector performance. The paper develops an index of regulatory governance and estimates its impact on sector performance, showing that indeed regulation and its governance matter. The authors use two unique databases: (i) the World Bank Performance Database, which contains detailed annual data for 250 private and public electricity companies in Latin America and the Caribbean; and (ii) the Electricity Regulatory Governance Database, which contains data on several aspects of the governance of electricity agencies in the region. The authors run different models to explain the impacts of change in ownership and different characteristics of the regulatory agency on the performance of the utilities. The results suggest that the mere existence of a regulatory agency, regardless of the utilities ' ownership, has a significant impact on performance. Furthermore, after controlling for the existence of a regulatory agency, the ownership dummies are still significant and with the expected signs. The authors propose an experience measure in order to identify the gradual impact of the regulatory agency on utility performance. The results confirm this hypothesis. In addition, the paper explores two different measures of governance, an aggregate measure of regulatory governance, and an index based on principal components, including autonomy, transparency, and accountability. The findings show that the governance of regulatory agencies matters an d has significant effects on performance.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4494.

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Date of creation: 01 Jan 2008
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Handle: RePEc:wbk:wbrwps:4494

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Keywords: National Governance Infrastructure Regulation Governance Indicators Banks & Banking Reform Emerging Markets

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Paul Joskow, 2003. "Electricity Sector Restructuring and Competition: Lessons Learned," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(121), pages 548-558. [Downloadable!]
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  2. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-75, June. [Downloadable!] (restricted)
  3. Rafael La Porta & Florencio López-De-Silanes, 1999. "The Benefits Of Privatization: Evidence From Mexico," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1193-1242, November. [Downloadable!] (restricted)
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  4. Roman Frydman & Cheryl Gray & Marek Hessel & Andrzej Rapaczynski, 1999. "When Does Privatization Work? The Impact Of Private Ownership On Corporate Performance In The Transition Economies," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1153-1191, November. [Downloadable!] (restricted)
  5. Aron, Janine, 2000. "Growth and Institutions: A Review of the Evidence," World Bank Research Observer, Oxford University Press, vol. 15(1), pages 99-135, February. [Downloadable!]
  6. Azumendi, Sebastian Lopez & Diop, Makhtar & Guasch, Jose Luis & Andres, Luis, 2007. "Assessing the governance of electricity regulatory agencies in the Latin American and the Caribbean region : a benchmarking analysis," Policy Research Working Paper Series 4380, The World Bank. [Downloadable!]
  7. Boardman, Anthony E & Vining, Aidan R, 1989. "Ownership and Performance in Competitive Environments: A Comparison of the Performance of Private, Mixed, and State-Owned Enterprises," Journal of Law & Economics, University of Chicago Press, vol. 32(1), pages 1-33, April.
  8. Ros, Agustin J, 1999. "Does Ownership or Competition Matter? The Effects of Telecommunications Reform on Network Expansion and Efficiency," Journal of Regulatory Economics, Springer, vol. 15(1), pages 65-92, January. [Downloadable!] (restricted)
  9. 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. [Downloadable!]
  10. 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, vol. 49(2), pages 403-52, June. [Downloadable!] (restricted)
  11. Chisari, Omar & Estache, Antonio & Romero, Carlos, 1997. "Winners and losers from utility privatization in Argentina : lessons from a general equilibrium model," Policy Research Working Paper Series 1824, The World Bank. [Downloadable!]
  12. 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. [Downloadable!]
  13. Gutierrez, Luis H., 2003. "Regulatory governance in the Latin American telecommunications sector," Utilities Policy, Elsevier, vol. 11(4), pages 225-240, December. [Downloadable!] (restricted)
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  14. Estache, Antonio & Rossi, Martin, 2004. "Have consumers benefited from the reforms in the electricity distribution sector in Latin America?," Policy Research Working Paper Series 3420, The World Bank. [Downloadable!]
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