Institutions, Contracts and Regulation of Infrastructure in Argentina

Abstract

Massive privatization in the Argentine infrastructure and public service sectors gave an opportunity to explore why we observe notorious differences in regulatory design choices and performance outcomes across sectors, under the umbrella of similar nation-specific institutional characteristics -same federal government producing reform during a short period of time (: 1990–95)-. Following the Levy and Spiller (1996) conceptual framework, we propose that some institutional characteristics (namely the nature of conflicts among groups affected by reform and administrative capabilities) determined a wide variety of government choices for regulatory incentives, producing different outcomes across sectors. Despite the will of the executive power to respect stable “rules of the game”, episodes of government opportunism appeared in most sectors. Poor regulatory incentive design and weak agencies, on the other hand, prompted ex-post opportunistic behavior from regulated firms, which renegotiated contractual conditions to their favor.