Interest Groups, Veto Points and Electricity Infrastructure Deployment
Witold J. Henisz
University of Pennsylvania - Management Department
Bennet A. Zelner
Duke University's Fuqua School of Business
William Davidson Institute Working Paper No. 711
In this paper, we examine the effects of interest group pressure and the structure of political institutions on infrastructure deployment by state-owned electric utilities in a panel of 78 countries during the period 1970-1994. We consider two factors that jointly influence the rate of infrastructure deployment: (1) the extent to which the consumer base consists of industrial consumers, which are capable of exerting discipline on political actors whose competing incentives are to construct economically inefficient white elephants to satisfy the demands of concentrated geographic interests, labor unions and construction firms; and (2) veto points in formal policymaking structures that constrain political actors, thereby reducing these actors' sensitivity to interest group demands. A higher fraction of industrial customers provides political actors with stronger incentives for discipline, reducing the deployment of white elephants and, thus, the infrastructure growth rate, ceteris paribus. Veto points reduce political actors' sensitivity to interest group demands in general and, thus, moderate the relationship between industrial interest group pressure and the rate of infrastructure deployment.
Number of Pages in PDF File: 45
Keywords: Electricity, institutional environment, investment, regulation, interest group, state-owned enterprise
JEL Classification: L94, L32, F21working papers series
Date posted: August 12, 2004
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