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Do infrastructure reforms reduce the effect of corruption? Theory and evidence from Latin America and the Caribbean

  • Liam Wren-Lewis

This paper investigates the interaction between corruption and infrastructure policy reforms. I construct a simple model to illustrate how both an incerase in regulatory autonomy and privatisation may influence the effect of corruption. This interaction is then analysed empirically using a panel of 153 electricity distribution firms across 18 countries in Latin America and the Caribbean between 1995 and 2007. I find evidence that greater corruption is associated with lower firm efficiency, but that this association is reduced when an independent regulatory agency is present. These results survive a range of robustness checks including instrumenting for regulatory governance and corruption. I also find slightly less robust evidence that private ownership further mitigates the association between corruption and efficiency.

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File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper576.pdf
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 576.

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Date of creation: 01 Oct 2011
Handle: RePEc:oxf:wpaper:576
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