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The impact of privatization on the performance of the infrastructure sector : the case of electricity distribution in Latin American countries

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Listed author(s):
  • Andres, Luis
  • Foster, Vivien
  • Guasch, Jose Luis
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    Abstract

    The authors analyze the impact of privatization on the performance of 116 electric utilities in 10 Latin American countries. The analysis makes a number of contributions to the literature on changes in infrastructure ownership. First, this is the first systemic analysis of the impact of privatization on the distribution of the electricity sector. Second, it constructs an unbalanced panel data set of key indicators for each country. Third, it includes a broader-than in past studies-range of indicators, such as output, employment, productivity, efficiency, quality, coverage, and prices, offering a fuller picture of the effects of privatization on consumers. Fourth, this research covers a longer period of time, and evaluates three stages-before, transition, and after-allowing for the identification of the short- and long-run effects of privatization, as opposed to previous analyses'short time series data that do not identify long-run outcomes. Finally, the counterfactual is considered through the analysis in trends. The authors apply two different methodologies. The first methodology uses means and medians from each period and tests the significance of the changes between periods. The second methodology consists of an econometric model that captures firm fixed effects, firm-specific time trends, and heteroscedasticity corrections. When needed, the authorsused firm-specific time trends to better understand the outcomes. The results suggest that changes in ownership generate significant improvements in labor productivity, efficiency, and product and service quality, and that most of those changes occur in the transition period. Improvements in the post transition period-beyond two years after the change in ownership-are much more modest.

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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3936.

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    Date of creation: 01 Jun 2006
    Handle: RePEc:wbk:wbrwps:3936
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    Keywords: Economic Theory&Research; Energy Production and Transportation; Public Sector Economics&Finance; Labor Markets; Science Education;

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    Cited by:

    1. Auriol, Emmanuelle & Blanc, Aymeric, 2009. "Capture and corruption in public utilities: The cases of water and electricity in Sub-Saharan Africa," Utilities Policy, Elsevier, vol. 17(2), pages 203-216, June.
    2. Riham Shendy & Zachary Kaplan & Peter Mousley, 2011. "Toward Better Infrastructure : Conditions, Constraints, and Opportunities in Financing Public-Private Partnerships in Select African Countries," World Bank Publications, The World Bank, number 2331.
    3. Nakhoda, Aadil, 2014. "The impact of electricity constraints on access to finance: A firm-level study," MPRA Paper 59507, University Library of Munich, Germany.
    4. Estache, Antonio & Rossi, Martin A., 2008. "Regulatory agencies : impact on firm performance and social welfare," Policy Research Working Paper Series 4509, The World Bank.
    5. Eduardo Martínez Chombo, 2009. "Sources of Over-Costs and Distortions in State-Owned Utilities in Mexico," Working Papers 2009-07, Banco de México.
    6. Daniel Chiquiar & Manuel Ramos Francia, 2009. "Competitiveness and Growth of the Mexican Economy," Working Papers 2009-11, Banco de México.
    7. Andres, Luis & Guasch, Jose Luis & Azumendi, Sebastian Lopez, 2008. "Regulatory governance and sector performance : methodology and evaluation for Electricity distribution in Latin America," Policy Research Working Paper Series 4494, The World Bank.

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