Contracts, Administrative Law or Regulatory Specificity: Workable Regulatory Frameworks for Developing Economies

Three features characterize utilities: first, their technologies are characterized by large specific, sunk, investments; second, their technologies are characterized by important economies of scale and scope; and third, their products are massively consumed. The main point of this paper is to explicate how these three features of utilities imply that in the absence of regulatory commitment investment may be inefficient or not take place, and how regulatory commitment has to be implemented differently across countries. This paper analyzes the conditions under which different regulatory structures may work, and explore its implications for the design of regulatory structures. The paper develops a matrix of regulatory structure/institutional features that will allow for a better understanding of the appropriateness of regulatory structures in developing economies.