Abstract
I use newly released data from the International Telecommunications Union to examine the effects of privatization and competition on network expansion and efficiency. Using a fixed-effects model, I find that during the 1986-1995 time period, those countries that have at least fifty percent of the assets of their main telecommunications provider in the private sector have significantly higher main lines per 100 inhabitants and, to a lesser degree, have higher growth in main lines per 100 inhabitants. There is no evidence, however, that privatization leads to higher growth in main lines per 100 inhabitants in those countries whose GDP per capita is less than $10,000. Privatization is positively associated with main lines per employee and growth in main lines per employee. While competition is not found to affect network expansion, it is found to positively affect efficiency as measured in main lines per employee. In order to account for the possible endogeneity of the privatization and competition dummy variables, all equations are estimated using an instrumental variable approach as well.
Similar content being viewed by others
References
Adam, Christopher, William Cavendish, and Percy S. Mistry. 1992. Adjusting Privatization: Case Studies from Developing Countries. Portsmouth, New Hampshire: Reed Publishing.
Arrow, Kenneth J. 1962. “Economic Welfare and the Allocation of Resources for Invention.” In The Rate and Direction of Inventive Activity, National Bureau of Economic Research. Princeton: Princeton University Press.
Baumol, William J. 1969. “Reasonable Rules for Rate Regulation: Plausible Policies for an Imperfect World.” In Prices: Issues and Theory, Practice, and Public Policy, edited by A. Phillips and O. Williamson. Philadelphia: University of Pennsylvania Press.
Berg, Sandford V., and John Tschirhart. 1988. Natural Monopoly Regulation: Principles and Practice. Cambridge University Press.
Bouin, O., and C. A. Michalet. 1991. Rebalancing the Public and Private Sectors: Developing Country Experience. Paris: OECD.
Bowden J. Roger, and Darrell A. Turkington. 1984. Instrumental Variables. Cambridge University Press.
Debreu, Gerard. 1959. Theory of Value: An Axiomatic Analysis of Economic Equilibrium. New Haven: Yale University Press.
Donald, Stephen G., and David E.M. Sappington. 1997. “Choosing Among Regulatory Options in the United States Telecommunications Industry.” Journal of Regulatory Economics 12:227-243.
Duncan, Gregory M., and Duane E. Leigh. 1985. “The Endogeneity of Union Status: An Empirical Test.” Journal of Labor Economics 3:385-402.
Foreman-Peck, J., and D. Manning. 1988. “How well is BT Performing? An International Comparison of Telecommunications Total Factor Productivity.” University of Newcastle, Department of Economics, Newcastle-upon-Tyne, England.
Galal, Ahmed, Leroy Jones, Pankaj Tandon, and Ingo Vogelsang. 1994. Welfare Consequences of Selling Public Enterprises: An Empirical Analysis. Washington, DC: The World Bank.
Government of Malaysia. 1985. Guidelines on Privatization. Economic Planning Unit.
Halvorsen, Robert., and Raymond Palmquist. 1980. “The Interpretation of Dummy Variables in Semilogarithmic Equations.” American Economic Review 70:474-5.
Hausman, J. A. “Specification Tests in Econometrics.” Econometrica 46:1251-1271.
Hayek, F.A. 1945. “The Use of Knowledge in Society.” American Economic Review 35:519-530.
Heckman, James J. 1979. “Sample Selection Bias As a Specification Error.” Econometrica 47:153-162.
Heckman, James J. 1978. “Dummy Endogenous Variables in a Simultaneous Equation System.” Econometrica 46:931-959.
International Telecommunications Union. 1997. Yearbook of Statistics: Telecommunication Services 1986–1995. Geneva Switzerland.
Kennedy, Peter. 1992. A Guide to Econometrics. Cambridge, Massachusetts: The MIT Press.
Kridel, Donald J., David E. M. Sappington., and Dennis L. Weisman. 1996. “The Effects of Incentive Regulation in the Telecommunications Industry: A Survey.” Journal of Regulatory Economics 9:269-306.
Kwoka, John E. 1996. Power Structure Ownership, Integration, and Competition in the U.S. Electricity Industry. Boston/Dordrecht/London: Kluwer Academic Publishers.
Kwoka, John E. 1993. “The Effects of Divestiture, Privatization, and Competition on Productivity in U.S. and U.K. Telecommunications.” Review of Industrial Organization 8:49-61.
Leibenstein, H. 1966. “Allocative Efficiency versus X-Efficiency.” American Economic Review 56:392-415.
Levy, Brian, and Pablo T. Spiller. 1996. Regulations, Institutions, and Commitment: Comparative Studies of Telecommunications. Cambridge University Press.
McNamara, John R. 1991. The Economics of Innovation in the Telecommunications Industry. New York: Greenwood Publishing Group.
Millward, R. 1988. “Measured Sources of Inefficiency in the Performance of Private and Public Enterprises in LDC's.” In Privatization in Less Developed Countries, edited by P. Cook and G. Kirkpatrick. Wheatsheaf, Hemel Hempstead.
Millward, R. 1982. “The Comparative Performance of Public and Private Ownership.” In The Mixed Economy edited by E. Roll. London: Macmillan.
Molano, Walter T. 1997. The Logic of Privatization: The Case of Telecommunications in the Southern Cone of Latin America. Westport, Connecticut: Greenwood Press.
North, Douglass C. 1990. Institutions, Institutional Change and Economic Performance. Cambridge University Press.
Ramamurti, Ravi. 1996. Privatizing Monopolies: Lessons from the Telecommunications and Transport Sectors in Latin America. Baltimore: The Johns Hopkins University Press.
Ramamurti, Ravi. 1992. “The Impact of Privatization on the Latin American Debt Problem.” Journal of International Business Studies 23:93-125.
Ros, Agustin J. 1997. “When, Where, and How? Implementing Effective Telecommunications Competition and Regulatory Policy.” The Journal of Project Finance 3:33-42.
Saunders, Robert J. 1994. Telecommunications and Economic Development. Washington, DC: The World Bank.
United Nations, Department for Economic and Social Information and Policy Analysis Statistics Division. 1996. Statistical Yearbook Forty-First Issue. New York.
Vickers, John., and George Yarrow. 1988. Privatization: An Economic Analysis. Cambridge, Massachusetts: The MIT Press.
Vernon, Raymond. 1988. The Promise of Privatization. New York: Council on Foreign Relations.
World Bank. 1991. World Development Report 1991: The Challenge of Development. Oxford: Oxford University Press.
Wellenius, Bjorn., and Peter Stern. 1994. Implementing Reforms in the Telecommunications Sector: Lessons from Experience. Washington, DC: World Bank.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Ros, A.J. Does Ownership or Competition Matter? The Effects of Telecommunications Reform on Network Expansion and Efficiency. Journal of Regulatory Economics 15, 65–92 (1999). https://doi.org/10.1023/A:1008048924876
Issue Date:
DOI: https://doi.org/10.1023/A:1008048924876