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© 1999 International Bank for Reconstruction and Development / The World Bank

research-article

Winners and Losers from the Privatization and Regulation of Utilities: Lessons from a General Equilibrium Model of Argentina

Omar Chisari, Antonio Estache, and Carlos Romero

Omar Chisari and Carlos Romero are affiliated with the Universidad Argentina de la Empresa in Buenos Aires and Antonio Estache is with the World Bank Institute (formerly the Economic Development Institute). The authors thank Daniel Benitez for extremely competent research assistance and Shanta Devarajan, Mathias Dewatripont, Francisco Ferreira, Cheikh Kane, loannis Kessides, Abel Mejia, Martín Rodríguez-Pardina, Chantal Roucolle, Suzanne Smith, participants in an Inter-American Development Bank seminar, and the referees for very useful comments and suggestions. A longer version of the article was issued as Chisari, Estache, and Romero (1997).

A computable general equilibrium (CGE) model is used to estimate the macroeconomic and distributional effects of the privatization and regulation of utilities in Argentina, begun in 1989. Based on data available after the privatization that indicate different kinds of efficiency gains in electricity, gas, water, and telecommunications, both the privatization and effective regulation are estimated to yield significant macroeconomic benefits. Gains from the privatization accrue mainly to high-income classes, while gains from the effective regulation of newly privatized utilities accrue mainly to low-income classes. CGE estimates of overall employment effects suggest that privatization was not a major contributor to the dramatic rise in unemployment in Argentina between 1993 and 1995. This rise was more likely due to the "Tequila Effect" of an interest rate shock.


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