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Has Deregulation Increased Investment in Infrastructure?: Firm-Level Evidence from OECD Countries

Author

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  • Sónia Araújo

    (OECD)

Abstract

This paper investigates the role played by deregulation on firms’ investment decisions in infrastructure sectors. The analysis covers the period 1980-2006, which was characterised by increased liberalisation and privatisation across OECD countries. We assess the relationship of different dimensions of the regulatory framework, such as the degree of barriers to entry, public ownership, vertical unbundling and the existence of an independent regulator with firm level investment behaviour. We find that the impact of regulation on investment is both sector and firm specific. A reduction in the degree of legal barriers to entry spurs investment in the electricity sector, but only for large firms. In telecommunications, the converse is true with barriers to entry having a negative effect on smaller firms’ investment rates. The existence of an independent regulatory authority spurs investment by telecommunication companies but this effect seems to be driven by large firms alone while it is associated with a reduction in investment levels by smaller companies in the gas sector. In Europe, the degree of vertical integration is positively associated with investment rates in the electricity sector. La déréglementation favorise-t-elle les investissements en infrastructure? : Analyse basée sur les entreprises des pays de l'OCDE Ce papier vise à étudier l’effet des politiques de déréglementation sur les investissements des entreprises des secteurs des infrastructures. L’analyse s’étend sur la période 1980-2006, qui a été caractérisée par la libéralisation et la privatisation des secteurs des infrastructures dans les pays de l’OCDE. Nous évaluons le rapport de plusieurs dimensions du cadre réglementaire, comme le niveau des barrières à l’entrée, détention publique, intégration verticale et l’existence d’un régulateur sectoriel indépendant avec le niveau d’investissement des entreprises. L’analyse montre que l’impact du cadre réglementaire sur l’investissement varie selon le secteur et le type d’entreprise. Une réduction des barrières à l’entrée encourage l’investissement dans le secteur de l’électricité, mais seulement pour les grandes entreprises. Dans le secteur des télécommunications, l’effet est l’inverse, avec un effet négatif des barrières à l’entrée sur l’investissement des entreprises les plus petites. L’existence d’un régulateur sectoriel indépendant favorise l’investissement dans le secteur des télécommunications, mais cet effet semble être produit uniquement par les grandes entreprises du secteur, tandis que pour les entreprises les plus petites du secteur du gaz un régulateur indépendant défavorise l’investissement. En Europe, le degré d’intégration verticale est positivement associé au taux d’investissement dans le secteur de l’électricité.

Suggested Citation

  • Sónia Araújo, 2011. "Has Deregulation Increased Investment in Infrastructure?: Firm-Level Evidence from OECD Countries," OECD Economics Department Working Papers 892, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:892-en
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    File URL: http://dx.doi.org/10.1787/5kg566hgsjwl-en
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    Keywords

    données de firmes; firm level data; infrastructure; infrastructure; investissement; investment; regulation; réglementation;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • K2 - Law and Economics - - Regulation and Business Law
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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