Of Carts and Horses: Regulation and Privatization in Telecommunications Reforms
In the early 1990s, many advocated quick privatization of state-owned monopolies in developing countries, assuming that market institutions would develop once firms were privately owned. More recent thinking emphasizes establishing institutions conducive to promoting competition before privatization. To date little empirical work has informed the debate. This paper addresses this gap by testing whether establishing a regulatory authority prior to privatizing incumbent telecommunications firms matters. I find that countries that established regulatory authorities prior to privatization saw increased telecom investment and telephone penetration compared to countries that did not. Moreover, investors paid more for telecom firms in countries that established a regulator prior to privatization.
Volume (Year): 6 (2003)
Issue (Month): 4 ()
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