Telecommunications privatization and tariff rebalancing: evidence from Latin America

Abstract

Using panel data on 23 countries, we find a positive and statistically significant relationship between privatization and network expansion and efficiency in the Latin American region. We also find that excess demand for basic service is strongly and negatively related to tariff rebalancing, suggesting that an increase in residential service prices can mitigate unmet demand for basic service in the Latin American region by, in the long run, increasing the supply of main lines. According to our results, a 10 percent increase from the average residential price in Latin America is likely to reduce unmet demand by approximately 4.1 percent. Finally, we find that privatization is negatively related to unmet demand. In particular, privatization reduces unmet demand by approximately 28 percent. This indicates that, even after controlling for tariff rebalancing, there are concrete efficiency gains from privatization.