Regulation and Private Sector Investment in Infrastructure: Evidence from Latin America

43 Pages Posted: 20 Apr 2016

See all articles by Sheoli Pargal

Sheoli Pargal

World Bank - Development Research Group (DECRG)

Date Written: April 17, 2003

Abstract

Pargal assesses the importance of the regulatory framework as a determinant of private sector investment in infrastructure. She uses recently compiled data on private and public sector investment in the water, power, telecommunications, railroads, and roads sectors between 1980 and 1998 in nine countries in Latin America. The author finds that the most significant institutional determinant of private investment volumes is the passage of legislation liberalizing the investment regime. This is important because it indicates that the legal basis for reform is probably more critical in determining the quality of the investment climate than specific aspects of the institutional framework governing private sector participation. In accordance with intuition, the author's results indicate that government action to increase regulatory certainty and minimize the perceived risk of expropriation through the establishment of independent regulatory bodies is a critical determinant of the volume of private investment flows. She also finds that the general relationship of private to public investment is one of substitutability.

This paper - a product of the Policy Support Division, Corporate Secretariat - is part of a larger effort in the Bank to understand the role of institutions in development.

Suggested Citation

Pargal, Sheoli, Regulation and Private Sector Investment in Infrastructure: Evidence from Latin America (April 17, 2003). World Bank Policy Research Working Paper No. 3037. Available at SSRN: https://ssrn.com/abstract=636399

Sheoli Pargal (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

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