The Political Economy of Privatization and Competition: Cross-Country Evidence from the Telecommunications Sector

Abstract

This article examines the political economy of privatization and liberalization in the telecommunications sector in recent decades. We find that countries with stronger proreform interest groups, namely the financial services sector and the urban consumers, are more likely to reform in more democratic countries. However, less democratic countries are more likely to maintain the public sector monopoly when the government benefits more from such a governance mode, e.g., when the fiscal deficit is higher. Democracy affects the pace of reforms by magnifying the voices of interest groups in more democratic countries and by moderating politicians' discretion in less democratic countries. J. Comp. Econ., September 2002 30(3), pp. 439–462. The Darden School of Business, P.O. Box 6550, University of Virginia, Charlottesville, Virginia 22906-6550; The World Bank, 1818 H Street, N.W., Washington, DC 20433; and Institute for Advanced Study, Wuhan University, Wuhan, China 430072. © 2002 Association for Comparative Economic Studies. Published by Elsevier Science (USA). All rights reserved. Journal of Economic Literature Classification Numbers: L9, L5, H1.