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In this paper we argue that politically independent regulatory institutions can provide benefits to consumers, governments, and multinational corporations investing in infrastructure projects. By tying the hands of politicians, independent regulatory agencies can reduce political risks for multinational investors and in these less risky environments, multinational investment will result in larger and higher quality infrastructure projects. Utilizing a dataset on 800 electricity investments from 1990-2000 in over 60 developing countries we find that independent regulatory agencies are associated with fewer contract disputes between investors and governments and in financially larger electricity investments.
Published: Monday, October 24, 2005
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