Do infrastructure reforms reduce the effect of corruption? Theory and evidence from Latin America and the Caribbean

Working paper

This paper investigates the interaction between corruption and infrastructure policy reforms. I construct a simple model to illustrate how both an incerase in regulatory autonomy and privatisation may influence the effect of corruption. This interaction is then analysed empirically using a panel of 153 electricity distribution firms across 18 countries in Latin America and the Caribbean between 1995 and 2007. I find evidence that greater corruption is associated with lower firm efficiency, but that this association is reduced when an independent regulatory agency is present. These results survive a range of robustness checks including instrumenting for regulatory governance and corruption. I also find slightly less robust evidence that private ownership further mitigates the association between corruption and efficiency.

Authors: Wren-Lewis, L

• Publication status: Published
• Publisher: University of Oxford
• Series: Department of Economics Discussion Paper Series
• Publication date: 2011-10-01
• Paper number: 576
• Keywords: corruption; infrastructure; regulation