The Role of Institutional Design in the Conduct of Infrastructure Industry Reforms – An Illustration Through Telecommunications in Developing Countries

Abstract

This paper is concerned with the role of political and economic institutions in the conduct of the infrastructure industries reform process in developing countries. Our point of departure is that the specific features of these countries' economies should be accounted for when considering policy design. We discuss the main results and policy lessons drawn from two studies of the telecommunications sector based on an econometric analysis of time-series-cross-sectional data on developed and developing countries. We synthesise the main empirical findings and policy implications pertaining to two issues. The first issue concerns the impact of the quality of institutions on the function of regulation. Our review points to the fact that political accountability of institutional systems is a key determinant of regulatory performance, in particular in developing countries. The second issue relates to the factors that shape the sectoral reforms themselves and the impact of these reforms on the development of the industry in developing countries. Our main conclusion is that countries’ institutional risk and financial constraints are among the major factors that explain which reforms are actually implemented.