Concessions of infrastructure in Latin America: Government-led renegotiation

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Publication Details

Output type: Other

Author list: Guasch JL, Laffont JJ, Straub S

Publisher: Wiley

Publication year: 2007

Journal: Journal of Applied Econometrics (0883-7252)

Volume number: 22

Issue number: 7

Start page: 1267

End page: 1294

Number of pages: 28

ISSN: 0883-7252

eISSN: 1099-1255

Languages: English-Great Britain (EN-GB)

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Open access status: green

Full text URL: http://publications.ut-capitole.fr/2875/1/concessions.pdf

Abstract

This paper analyzes government-led renegotiations in infrastructure concession contracts in Latin America, based on the same sample used in Guasch, Laffont and Straub (2003) to examine firm-led renegotiations. After extending the theoretical framework to a multiple-period context in which both Pareto-improving and rent-shifting renegotiations at the initiative of the government can occur, we develop an original instrumental variable strategy to address the issue of contract endogeneity and derive empirical results. While some of the main insights concerning the importance of having a regulator in place when awarding concessions and the fragility of price cap regulatory schemes are unchanged, significant differences arise with respect to the effect of investment and financing, as well as the corruption variables. We provide evidence that a good regulatory framework is especially important in contexts with weak governance and political opportunism. Copyright (c) 2007 John Wiley & Sons, Ltd.

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