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Corruption and concession renegotiations.: Evidence from the water and transport sectors in Latin America

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  • Guasch, J. Luis
  • Straub, Stphane

Abstract

Numerous renegotiations have plagued water and transport concession contracts in Latin America. Using a panel dataset of over 300 concession contracts from Latin America between 1989 and 2000, we show that country-level corruption is a significant determinant of these renegotiations and that the effect of corruption varies depending on the type of renegotiations considered. While a more corrupt environment clearly leads to more firm-led renegotiations, it significantly reduces the incidence of government-led ones. The paper then discusses and tests the likely channels through which these different effects of corruption arise, looking in particular at the interactions between country-level corruption and relevant microeconomic institutions.

Suggested Citation

  • Guasch, J. Luis & Straub, Stphane, 2009. "Corruption and concession renegotiations.: Evidence from the water and transport sectors in Latin America," Utilities Policy, Elsevier, vol. 17(2), pages 185-190, June.
  • Handle: RePEc:eee:juipol:v:17:y:2009:i:2:p:185-190
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    References listed on IDEAS

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    1. Guasch, J. Luis & Laffont, Jean-Jacques & Straub, Stephane, 2003. "Renegotiation of concession contracts in Latin America," Policy Research Working Paper Series 3011, The World Bank.
    2. Patrick Bajari & Steven Tadelis, 1999. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," Working Papers 99029, Stanford University, Department of Economics.
    3. Estache, Antonio & Goicoechea, Ana & Trujillo, Lourdes, 2009. "Utilities reforms and corruption in developing countries," Utilities Policy, Elsevier, pages 191-202.
    4. Guasch, J. Luis & Laffont, Jean-Jacques & Straub, Stéphane, 2008. "Renegotiation of concession contracts in Latin America: Evidence from the water and transport sectors," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 421-442, March.
    5. Karla Hoff & Joseph E. Stiglitz, 2004. "After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies," American Economic Review, American Economic Association, pages 753-763.
    6. Laffont,Jean-Jacques, 2005. "Regulation and Development," Cambridge Books, Cambridge University Press, number 9780521840187, November.
    7. Patrick Bajari & Robert McMillan & Steven Tadelis, "undated". "Auctions versus Negotiations in Procurement: An Empirical Analysis," Working Papers 02007, Stanford University, Department of Economics.
    8. Dal Bo, Ernesto & Rossi, Martin A., 2007. "Corruption and inefficiency: Theory and evidence from electric utilities," Journal of Public Economics, Elsevier, pages 939-962.
    9. Eduardo Engel & Ronald Fischer & Alexander Galetovic, 2006. "Renegotiation without Holdup: Anticipating Spending and Infrastructure Concessions," Cowles Foundation Discussion Papers 1567, Cowles Foundation for Research in Economics, Yale University.
    10. Manzetti, Luigi, 1999. "Privatization South American Style," OUP Catalogue, Oxford University Press, number 9780198294665.
    11. J. Luis Guasch & Jean-Jacques Laffont & Stéphane Straub, 2007. "Concessions of infrastructure in Latin America: Government-led renegotiation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1267-1294.
    12. David Martimort & Stephane Straub, 2006. "Privatization and Changes in Corruption Patterns: The Roots of Public Discontent," ESE Discussion Papers 147, Edinburgh School of Economics, University of Edinburgh.
    13. Steven Tadelis, 2009. "Auctions Versus Negotiations in Procurement: An Empirical Analysis," Journal of Law, Economics, and Organization, Oxford University Press, vol. 25(2), pages 372-399, October.
    14. Bajari, Patrick & Tadelis, Steven, 2001. "Incentives versus Transaction Costs: A Theory of Procurement Contracts," RAND Journal of Economics, The RAND Corporation, pages 387-407.
    15. J. Luis Guasch, 2004. "Granting and Renegotiating Infrastructure Concessions : Doing it Right," World Bank Publications, The World Bank, number 15024.
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    Citations

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    Cited by:

    1. Stéphane Saussier & Carine Staropoli & Anne Yvrande-Billon, 2009. "Public–Private Agreements, Institutions, and Competition: When Economic Theory Meets Facts," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(1), pages 1-18, September.
    2. repec:eee:juipol:v:48:y:2017:i:c:p:109-121 is not listed on IDEAS
    3. Iossa, Elisabetta & Martimort, David, 2016. "Corruption in PPPs, incentives and contract incompleteness," International Journal of Industrial Organization, Elsevier, pages 85-100.
    4. Liam Wren-Lewis, 2015. "Do Infrastructure Reforms Reduce the Effect of Corruption? Theory and Evidence from Latin America and the Caribbean," World Bank Economic Review, World Bank Group, pages 353-384.
    5. Emmanuelle Auriol & Stéphane Straub, 2011. "Privatization of Rent-Generating Industries and Corruption," Chapters,in: International Handbook on the Economics of Corruption, Volume Two, chapter 7 Edward Elgar Publishing.
    6. Kokkaew, Nakhon & Oliveira Cruz, Carlos & Alexander, Derek, 2015. "The impact of rule of laws on the recovery of distressed PPP infrastructure Projects," MPRA Paper 77494, University Library of Munich, Germany.
    7. repec:eee:juipol:v:48:y:2017:i:c:p:122-131 is not listed on IDEAS
    8. repec:idb:brikps:68018 is not listed on IDEAS
    9. Antonio Estache & Liam Wren-Lewis, 2010. "What Anti-Corruption Policy Can Learn from Theories of Sector Regulation," Working Papers ECARES ECARES 2010-033, ULB -- Universite Libre de Bruxelles.
    10. Silvestre, Bruno S., 2015. "Sustainable supply chain management in emerging economies: Environmental turbulence, institutional voids and sustainability trajectories," International Journal of Production Economics, Elsevier, vol. 167(C), pages 156-169.
    11. Elisabetta Iossa & David Martimort, 2014. "Corruption in Public-Private Partnerships, Incentives and Contract Incompleteness," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(3), pages 14-16, October.
    12. Massarutto, Antonio & Ermano, Paolo, 2013. "Drowned in an inch of water," Utilities Policy, Elsevier, pages 20-31.
    13. Miranda Sarmento, J. & Renneboog, L.D.R., 2014. "Anatomy of Public-Private Partnerships : Their Creation, Financing, and Renegotiations," Discussion Paper 2014-017, Tilburg University, Center for Economic Research.
    14. Antonio Estache & Liam Wren-Lewis, 2010. "What Anti-Corruption Policy Can Learn from Theories of Sector Regulation," Working Papers ECARES ECARES 2010-033, ULB -- Universite Libre de Bruxelles.
    15. Domingues, Sérgio & Sarmento, Joaquim Miranda, 2016. "Critical renegotiation triggers of European transport concessions," Transport Policy, Elsevier, pages 82-91.
    16. Antonio Estache & Liam Wren-Lewis, 2011. "Anti-Corruption Policy in Theories of Sector Regulation," Chapters,in: International Handbook on the Economics of Corruption, Volume Two, chapter 9 Edward Elgar Publishing.
    17. Miranda Sarmento, J.J. & Renneboog, Luc, 2017. "Renegotiating Public-Private Partnerships," Discussion Paper 2017-014, Tilburg University, Center for Economic Research.
    18. repec:ces:ifodic:v:12:y:2014:i:3:p:19126465 is not listed on IDEAS

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