Regulatory Reforms in the Telecommunications Sector in Developing Countries: The Role of Democracy and Private Interests

Abstract

We investigate the determinants of regulatory reforms between 1990 and 1998 in 50 developing countries. We find that the reforms are attributable to differences in the configurations of interest groups and in the political structure - in particular, the decision-making mechanisms and the ideology of the legislature. Regulatory reforms are more likely in countries with strong pro-reform interest groups (a larger financial sector and a greater proportion of urban consumers) and less likely in countries where incumbent operators have already made large investments and hence have strong incentives to oppose the reforms. Democracy facilitates the actions of interest groups.

Keywords: democracy, telecommunications, regulation, political structure, special interest groups, developing countries

JEL Classification: L9, L5, H1