The Role of Institutional Design in the Conduct of Infrastructure Industries Reforms - An Illustration through Telecommunications in Developing Countries

Abstract

This paper discusses the relationship between the quality of political and economic institutions and the performance of the infrastructure industries reform process in developing countries. Our point of departure is that, when thinking about this relationship, it is necessary to take into account the specific features of these countries' economies (Gasmi and Recuero Virto, 2005, Laffont, 2005). Based on two econometric analysis of time-series-cross-sectional data on the telecommunications sector, we present the empirical findings and policy implications pertaining two issues (Gasmi et al., 2006, Gasmi and Recuero Virto, 2007). The first issue concerns the impact of the quality of institutions on the performance of regulation. Our review points to the fact that political accountability of institutional systems is a key determinant of regulatory performance. The second issue relates to the factors that shape the sectorial reforms themselves and the impact on these reforms on the development of the industry. Our main conclusion is that countries' institutional risk and financial constraints are among the major factors that explain which reforms are actually implemented.