The Impact of Regulatory Governance and Privatization on Electricity Industry Generation Capacity in Developing Economies

Posted: 29 Feb 2008

See all articles by John S. Cubbin

John S. Cubbin

City University London - Department of Economics

Jon Stern

City, University of London - Centre for Competition and Regulatory Policy - Department of Economics

Abstract

This article assesses whether a regulatory law and higher quality regulatory governance are associated with superior outcomes in the electricity industry. The analysis, for 28 developing economies over 1980-2001, draws on theoretical and empirical work on the impact of telecommunications regulators in developing economies. Controlling for privatization and competition and allowing for country-specific fixed effects, both regulatory law and higher quality regulatory governance are positively and significantly associated with higher per capita generation capacity. This positive impact increases for more than 10 years, as experience develops and regulatory reputation grows. The results are robust to estimating alternative dynamic specifications (including error correction models), to inclusion of economy governance political risk indicators, and to controlling for possible endogeneity biases. The article concludes with a short discussion of causality in panel data modeling of governance models and the policy implications for regulatory reform.

Suggested Citation

Cubbin, John S. and Stern, Jon, The Impact of Regulatory Governance and Privatization on Electricity Industry Generation Capacity in Developing Economies. World Bank Economic Review, Vol. 20, No. 1, pp. 115-141, 2006. Available at SSRN: https://ssrn.com/abstract=916910

John S. Cubbin (Contact Author)

City University London - Department of Economics ( email )

Northampton Square
London, EC1V 0HB
United Kingdom

Jon Stern

City, University of London - Centre for Competition and Regulatory Policy - Department of Economics ( email )

Northampton Square
London, EC1V 0HB
United Kingdom

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