Publication: Taking Stock of the Political Economy of Power Sector Reforms in Developing Countries: A Literature Review
Date
2018-07
ISSN
Published
2018-07
Author(s)
Lee, Alan David
Usman, Zainab
Abstract
The power sector reform experiences of
developing countries vary greatly. To help explain this from
a political economy perspective, this paper reviews several
dozen statistical analyses, multi-country case studies, and
development practice publications. The frame of reference is
the model of market-oriented reforms that became a global
norm in the 1990s. Findings are organized in terms of the
history, theory, motives, processes and outcomes of reforms.
Market orientation emerged around the 1980s as part of a
shift in economic theory and policy away from state control,
and was expected to improve efficiency and investments.
Reform advocates never took political economy issues into
full consideration. Yet, policy makers have had
sociopolitical as well as technical motives for reform, such
as crisis response. International norms and competition for
foreign investment and trade pulled governments to model
reforms, while development partners pushed them as a
condition of aid. Reform implementation has been
characterized by strong tensions among different public and
private interests. Concretely, 1990s model reforms were
based on a logic of depoliticizing pricing and investment
decisions; often placing policy makers in a conflict of
interest situation. Thus, the political costs and risks of
reform have often exceeded the benefits perceived by local
decision makers, especially as reforms did not generally
result in immediate benefits for citizens. In practice,
incremental, inclusive processes may be better than quick
and stealthy reforms that sidestep stakeholders'
concerns. While there was limited evidence of efficacy at
the time the reforms were implemented, ex post the outcomes
of reforms are ambiguous, as improvements in some areas have
been offset by negative results elsewhere. For increasing
access to electricity and clean energy, 1990s model reforms
may help, but they are neither necessary nor sufficient, nor
did they focus on these objectives. In conclusion, the
success or failure of policy prescriptions such as 1990s
model reforms are contingent on dynamic, context-specific
institutions as well as factors beyond the sector. More work
is needed on integrated, flexible approaches to think and
work politically in the sector, and to account for new
technology and diverse sector development objectives.
Citation
“Lee, Alan David; Usman, Zainab. 2018. Taking Stock of the Political Economy of Power Sector Reforms in Developing Countries; Taking Stock of the Political Economy of Power Sector Reforms in Developing Countries: A Literature Review : A Literature Review. Policy Research Working Paper;No. 8518. © World Bank, Washington, DC. http://openknowledge.worldbank.org/handle/10986/29991 License: CC BY 3.0 IGO.”
Report Series
Report Series
Other publications in this report series
-
PublicationTaxation and Capital Structure : Evidence from a Transition Economy(World Bank, Washington, DC, 2008-10)The authors examine the effects of taxation on financing policy using the corporate tax reform in 2001 in Croatia as a natural experiment. Since the extant literature on tax effects on capital structure studies listed firms in developed countries, it is worth investigating whether the same results apply to privately-held, small and medium size firms in transition economies. The findings provide significant evidence that lower taxes have affected the capital structure of Croatian firms, resulting in increased equity levels and decreased long-term debt levels. The authors also find that smaller and more profitable firms were more likely to reduce their debt levels. These findings are consistent with the trade-off theory of capital structure, which suggests that lower taxes decrease the incentive to hold debt due to decreasing interest tax deductibility.
-
PublicationThe Market for Retirement Products in Australia(World Bank, Washington, DC, 2008-10)Australia introduced a mandatory retirement savings scheme in 1992. This built on pre-existing voluntary occupational plans. The new scheme has been very successful in expanding coverage and mobilizing large financial savings that are equal to close to 100 percent of GDP. However, Australia does not impose restrictions on payout options. The payout phase used to be dominated by lump sum withdrawals, which accounted for 80 percent of benefit payments as recently as 2002. But pension payments increased in recent years and now represent 45 percent of total payments. The vast majority of these pension payments take the form of term annuities and allocated annuities. The latter are similar to phased withdrawals in Chile but run for fixed terms of up to 25 years rather than for lifetime terms. The demand for life annuities and lifetime phased withdrawals is very limited. The paper discusses the factors that have shaped the pattern of demand for retirement products, including the availability of the universal age pension and the effect of clawback provisions, the impact of the high level of home ownership, and the widespread preference of retiring workers for reliance on self-annuitization. The paper also reviews the prudential regulation of superannuation funds and life insurance companies.
-
PublicationThe Market for Retirement Products in Sweden(World Bank, Washington, DC, 2008-10)Far-reaching changes in the regulation of financial markets and the organization of public pensions in the 1980s and 1990s transformed the landscape for retirement products in Sweden. First, banking and insurance were extensively deregulated in the 1980s, while the securities markets experienced major expansion. Insurance received a large boost from the authorization of unit-linked products in the early 1990s. Second, the public pension system was reformed. Survivor benefits for widows were eliminated from the public pillar in the late 1980s, leading to a large increase in demand for term life insurance. The old defined benefit public pension system was replaced by a notional or nonfinancial defined contribution (NDC) scheme, while a funded defined contribution (FDC) component was also created in the public pillar. The four occupational pension funds that cover the majority of Swedish workers were also converted into FDC schemes. This paper reviews the implications of these changes for the Swedish annuity market. It discusses the regulation of payout options in Sweden, highlighting the compulsory use of life annuities in the public pillar and the preference for term annuities in the occupational funds. It examines the performance of providers of retirement products, including the PPM, and reviews the increasing focus on risk-based regulation and supervision. The paper also emphasizes Sweden's success in moving in the direction of increased funding and privatization of old age insurance, while maintaining its basic character as a highly developed welfare state.
-
PublicationExport Surges : The Power of a Competitive Currency(World Bank, Washington, DC, 2008-10)How can countries stimulate and sustain strong export growth? To answer this question, the authors examine 92 episodes of export surges, defined as significant increases in manufacturing export growth that are sustained for at least seven years. They find that export surges in developing countries tend to be preceded by a large real depreciation-which leaves the exchange rate significantly undervalued-and a reduction in exchange rate volatility. In contrast, in developed countries, the role of the exchange rate is less pronounced. The authors examine why the exchange rate is so important in developing countries and find that the depreciation leads to a significant reallocation of resources in the export sector. In particular, depreciation generates more entries into new export products and new markets, and the percentage of new entries that fail after one year declines. These new products and new markets are important, accounting for 25 percent of export growth during the surge in developing countries. The authors argue that maintaining a competitive currency leads firms to expand the product and market space for exports, inducing a large reorientation of the tradable sector.
-
PublicationPolitical Alternation as a Restraint on Investing in Influence : Evidence from the Post-Communist Transition(World Bank, Washington, DC, 2008-10)The authors develop and implement a method for measuring the frequency of changes in power among distinct leaders and ideologically distinct parties that is comparable across political systems. The authors find that more frequent alternation in power is associated with the emergence of better governance in post communist countries. The results are consistent with the hypothesis that firms seek durable protection from the state, which implies that expected political alternation is relevant to the decision whether to invest in influence with the governing party or, alternatively, to demand institutions that apply predictable rules, with equality of treatment, regardless of the party in power.