The World Bank Economic Review Advance Access published online on October 26, 2009
The World Bank Economic Review, doi:10.1093/wber/lhp010
Political Accountability and Regulatory Performance in Infrastructure Industries: An Empirical Analysis
Correspondence: email address is pnoumbaum{at}worldbank.org
JEL codes: L51, H11, L96, L97, C23
The relationship between the quality of political institutions and the performance of regulation has recently assumed greater prominence in the policy debate on the effectiveness of infrastructure industry reforms. Taking the view that political accountability is a key factor linking political and regulatory structures and processes, this article empirically investigates its impact on the performance of regulation in telecommunications in time-series–cross-sectional data sets for 29 developing countries and 23 developed countries during 1985–99. In addition to confirming some well-documented results on the positive role of regulatory governance in infrastructure industries, the article provides empirical evidence on the impact of the quality of political institutions and their modes of functioning on regulatory performance. The analysis finds that the impact of political accountability on the performance of regulation is stronger in developing countries. An important policy implication is that future reforms in these countries should give due attention to the development of politically accountable systems.
Farid Gasmi is a professor at the Toulouse School of Economics, Atelier de Recherche Quantitative Appliquée au Développement Economique (ARQADE) and Institut d'Economie Industrielle (IDEI); his email address is gasmi{at}cict.fr. Paul Noumba Um (corresponding author) is a lead economist in the Sustainable Development Department of the Middle East and North Africa Region at the World Bank. Laura Recuero Virto is an economist at the Organisation for Economic Co-operation and Development (OECD); her email address is laura.recuerovirto{at}oecd.org. An earlier version of this article was presented at the European Network for Training in Economic Research (ENTER) Jamboree, University of Mannheim, 2007; the Research Team on Markets, Employment, and Simulation (ERMES) seminar of the Université Panthéon-Assas Paris II, Paris, 2007; the European Conference on Competition and Regulation, Corfu, 2007; the conference of the European Association for Research in Industrial Economics, Valencia, 2007; the Télécom ParisTech conference on Telecommunications Infrastructure and Economic Performance, Paris, 2008; and the conference on Infrastructure Regulation, What Works, Why, and How Do We Know? Hong Kong, 2009. The authors thank the participants at these events for comments. They are grateful to Jean-Paul Azam, Aida Caldera, Antonio Estache, Frannie Léautier, Wilfried Sand-Zantman, the editor of the journal, and three anonymous referees for useful suggestions. They also thank Luis Hernando Gutierrez, Randeep Rathindran, and Lixin Colin Xu for help in constructing the data. Part of this research was undertaken during the summer of 2006 while Farid Gasmi and Laura Recuero Virto were visiting researchers at the World Bank Institute. These authors thank the members of the institute, in particular, Gabriela Chenet-Smith, for their warm hospitality.