Regulation of Telecom in Developing Countries: Outcomes, Incentives and Commitment

Ahmed Galal ()
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Ahmed Galal: Economic Research Forum

No 9513, Working Papers from Economic Research Forum

Abstract: In response to the recent wave of privatization and regulation of monopolies in developing countries, this paper evaluates the impact of regulation on private sector behavior in the telecommunications sector in seven countries. It shows that regulation is most effective (as evidenced by reasonable private sector returns, high private investment and improved productivity) where the government/regulators reduce the firms' information advantage, induce the firm (through pricing) to operate efficiently, and institute safeguarding mechanisms to protect the firm against expropriation of assets. Conversely, where the government/regulators fail to resolve the information, incentives and commitment problems private sector returns are relatively high, investment is relatively low and productivity is also low.

Date: 1995-06-07, Revised 1995-06-07
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