Regulatory Effectiveness and the Impact of Variations in Regulatory Governance: Electricity Industry Capacity and Efficiency in Developing Countries

This paper assesses for 28 developing countries over the period 1980-2001 whether the existence of a regulatory law and higher quality regulatory governance are significantly associated with superior electricity outcomes. The analysis draws on theoretical and empirical work on the impact of independent central banks and of developing country telecommunications regulators. The empirical analysis concludes that, controlling for other relevant variables and allowing for country specific fixed effects, a regulatory law and higher quality governance is positively and significantly associated with higher per capita generation capacity levels. In addition, this positive impact continues to increase for at least three years and probably for over 10 years as experience develops and regulatory reputation grows. The results are robust to alternative dynamic specifications, eg as estimates from alternative lag structures and for the application of an error correction model, and show no sign of any significant endogeneity biases.Regulatory Reform, Other Topics