Corruption and Concession Renegotiations : Evidence from the Water and Transport Sectors in Latin America

Abstract

Numerous renegotiations have plagued water and transport concession contracts in Latin America. Using a panel dataset of over 300 concession contracts from Latin America between 1989 and 2000, we show that country-level corruption is a significant determinant of these renegotiations and that the effect of corruption varies depending on the type of renegotiations considered. While a more corrupt environment clearly leads to more firm-led renegotiations, it significantly reduces the incidence of government-led ones. The paper then discusses and tests the likely channels through which these different effects of corruption arise, looking in particular at the interactions between country-level corruption and relevant microeconomic institutions.