To what extent do infrastructure and financial sectors reforms interplay? Evidence from panel data on the power sector in developing countries
The main goal of this study is to demonstrate the existence of a significant empirical link between infrastructure and financial sectors reforms the effects of which are reflected in infrastructure sectors performance. This paper reports on the findings of an exploration of this issue for the case of the power sector in developing countries. We estimate the impact of the four main components of the power sector reform in these countries, namely, the creation of an independent regulatory agency, the unbundling of generation, transmission, and distribution, the introduction of competition and the implementation of privatization programs in the generation and distribution segments, on some of this sector’s performance outcomes, and attempt to assess the contribution of the domestic financial systems’ reforms to these outcomes. In a dataset on 42 developing countries covering the 1990-2005 period, we find that private participation in generation and distribution has significantly improved power supply as reflected in higher electricity generation per capita and technical and labor efficiency in the distribution segment. The unbundling of generation, transmission, and distribution has contributed to improving productive efficiency through a better use of the labor factor in the distribution segment. We find that the creation of a separate regulatory agency has boosted the generation segment in terms of both capacity and sales and has generated better incentives for a more efficient use of labor input in the distribution segment. We also find that regulatory experience has significantly contributed to improving access to electricity. The results suggest that while the power sector, in particular, its generation segment, has significantly benefited from the introduction of independent regulation, the beneficial effects of (good) regulatory practices have been exacerbated by the modernization of the financial systems. More specifically, improved financial systems have eased access to capital for operators allowing them to upgrade their networks and decrease power losses in distribution. The overall results obtained in this paper strongly recommend that along with reforming the power sector, policy makers in developing countries should implement the financial reforms that would deepen their domestic financial systems thus allowing them to recover the full benefits of these systems’ positive externalities on the performance of the sector.
|Date of creation:||Nov 2011|
|Date of revision:|
|Contact details of provider:|| Phone: (+33) 5 61 12 86 23|
Web page: http://www.tse-fr.eu/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fink, Carsten & Mattoo, Aaditya & Rathindran, Randeep, 2002.
"An assessment of telecommunications reform in developing countries,"
Policy Research Working Paper Series
2909, The World Bank.
- Fink, Carsten & Mattoo, Aaditya & Rathindran, Randeep, 2003. "An assessment of telecommunications reform in developing countries," Information Economics and Policy, Elsevier, vol. 15(4), pages 443-466, December.
- Zhang, Yingang & Parker, David & Kirkpatrick, Colin, 2004.
"Competition, Regulation and Privatisation of Electricity Generation in Developing Countries: Does the Sequencing of the Reforms Matter?,"
Centre on Regulation and Competition (CRC) Working papers
30599, University of Manchester, Institute for Development Policy and Management (IDPM).
- Zhang, Yinfang & Parker, David & Kirkpatrick, Colin, 2005. "Competition, regulation and privatisation of electricity generation in developing countries: does the sequencing of the reforms matter?," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(2-3), pages 358-379, May.
- Jamasb, T. & Mota, R. & Newbery, D. & Pollitt, M., 2004.
"‘Electricity Sector Reform in Developing Countries: A Survey of Empirical Evidence on Determinants and Performance’,"
Cambridge Working Papers in Economics
0439, Faculty of Economics, University of Cambridge.
- Jamasb, Tooraj & Mota, Raffaella & Newbery, David & Pollitt, Michael, 2005. "Electricity sector reform in developing countries : a survey of empirical evidence on determinants and performance," Policy Research Working Paper Series 3549, The World Bank.
- John Cubbin & Jon Stern, 2006. "The Impact of Regulatory Governance and Privatization on Electricity Industry Generation Capacity in Developing Economies," World Bank Economic Review, World Bank Group, vol. 20(1), pages 115-141.
- Levine, Ross, 2001. "International Financial Liberalization and Economic Growth," Review of International Economics, Wiley Blackwell, vol. 9(4), pages 688-702, November.
- Gasmi, Farid & Recuero Virto, Laura, 2008.
"The Determinants and Impact of Telecommunications Reform in Developping Countries,"
IDEI Working Papers
530, Institut d'Économie Industrielle (IDEI), Toulouse.
- Gasmi, Farid & Recuero Virto, Laura, 2010. "The determinants and impact of telecommunications reforms in developing countries," Journal of Development Economics, Elsevier, vol. 93(2), pages 275-286, November.
- Gasmi, Farid & Recuero Virto, Laura, 2009. "The Determinants and Impact of Telecommunications Reforms in Developing Countries," TSE Working Papers 09-092, Toulouse School of Economics (TSE).
- Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
- Estian Calitz & Johan Fourie, 2010.
"Infrastructure in South Africa: Who is to finance and who is to pay?,"
Development Southern Africa,
Taylor & Francis Journals, vol. 27(2), pages 177-191.
- Estian Calitz & Johan Fourie, 2007. "Infrastructure in South Africa: Who is to finance and who is to pay?," Working Papers 15/2007, Stellenbosch University, Department of Economics.
- Wallsten, Scott J, 2001. "An Econometric Analysis of Telecom Competition, Privatization, and Regulation in Africa and Latin America," Journal of Industrial Economics, Wiley Blackwell, vol. 49(1), pages 1-19, March.
- Michael W. Klein & Giovanni Olivei, 1999.
"Capital Account Liberalization, Financial Depth and Economic Growth,"
NBER Working Papers
7384, National Bureau of Economic Research, Inc.
- Michael Klein & Giovanni Olivei, 1999. "Capital account liberalization, financial depth, and economic growth," Working Papers 99-6, Federal Reserve Bank of Boston.
- Khan, Saleem M. & Khan, Zahira S., 2007. "World Investment Report 2006, FDI from Developing and Transition Economies: Implications for Development by United Nations Conference on Trade and Development (UNCTAD). United Nations Publications, Ne," Journal of Asian Economics, Elsevier, vol. 18(3), pages 553-561, June.
- James B. Ang & Warwick J. McKibbin, 2005.
"Financial Liberalization, Financial Sector Development And Growth: Evidence From Malaysia,"
CAMA Working Papers
2005-05, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- Ang, James B. & McKibbin, Warwick J., 2007. "Financial liberalization, financial sector development and growth: Evidence from Malaysia," Journal of Development Economics, Elsevier, vol. 84(1), pages 215-233, September.
- James B. Ang & Warwick J. McKibbin, 2005. "Financial Liberalization, Financial Sector Development And Growth: Evidence From Malaysia," CAMA Working Papers 2005-05, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
- Yin-Fang Zhang & David Parker & Colin Kirkpatrick, 2008.
"Electricity sector reform in developing countries: an econometric assessment of the effects of privatization, competition and regulation,"
Journal of Regulatory Economics,
Springer, vol. 33(2), pages 159-178, April.
- Zhang, Yin-Fang & Kirkpatrick, Colin & Parker, David, 2002. "Electricity Sector Reform in Developing Countries: An Econometric Assessment of the Effects of Privatisation, Competition and Regulation," Centre on Regulation and Competition (CRC) Working papers 30593, University of Manchester, Institute for Development Policy and Management (IDPM).
- Wei Huang, 2006. "Emerging Markets, Financial Openness and Financial Development," Bristol Economics Discussion Papers 06/588, Department of Economics, University of Bristol, UK.
- José de Gregorio, 1999. "Financial integration, financial development and economic growth," Estudios de Economia, University of Chile, Department of Economics, vol. 26(2 Year 19), pages 137-161, December.
- Ben Naceur, Samy & Ghazouani, Samir & Omran, Mohammed, 2008. "Does stock market liberalization spur financial and economic development in the MENA region?," Journal of Comparative Economics, Elsevier, vol. 36(4), pages 673-693, December.
When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:25318. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.