Price Caps, Efficiency Payoffs, and Infrastructure Contract Renegotiation in Latin America
Twenty years ago, as the United Kingdom was getting ready to launch the privatization of its public services, Professor Littlechild developed and operationalized the concept of price caps as a regulatory regime to control for residual monopoly cond...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2003/08/2507713/price-caps-efficiency-payoffs-infrastructure-contract-renegotiation-latin-america http://hdl.handle.net/10986/18130 |
| Summary: | Twenty years ago, as the United Kingdom
was getting ready to launch the privatization of its public
services, Professor Littlechild developed and
operationalized the concept of price caps as a regulatory
regime to control for residual monopoly conditions in those
services. Ten years later, Latin American countries, as they
embarked into their own infrastructure reforms, also adopted
the price cap regulatory model. Relying on a large data base
on the factors driving contract renegotiation in the region
and a survey of the literature on efficiency gains, the
authors assess the impact of this regulatory regime in Latin
America. They show that while the expected efficiency gains
were amply achieved, these gains were seldom passed on to
the users. Instead they were shared by the government and
the firms. Moreover, the adoption of price caps implied
higher costs of capital and hence, tariffs, and brought down
levels of investment. |
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