Telecommunications Privatization and Tariff Rebalancing: Evidence from Latin America
1 April 2000
By Dr. Agustin Ros and former NERA Vice President Dr. Aniruddha Banerjee
Using panel data on 23 countries, the authors find a positive and statistically significant relationship between privatization and network expansion and efficiency in the Latin American region. They also find that excess demand for basic service is strongly and negatively related to tariff rebalancing, suggesting that an increase in residential service prices can mitigate unmet demand for basis service in the Latin American region by, in the long run, increasing the supply of main lines.
According to their results, a 10 percent increase from the average residential price in Latin America is likely to reduce unmet demand by approximately 4.1 percent. Finally, the authors find that privatization is negatively related to unmet demand. In particular, privatization reduces unmet demand by approximately 28 percent. This indicates that, even after controlling for tariff rebalancing, there are concrete efficiency gains from privatization.
This report was published in Telecommuniations Policy, Vol. 24, 2000.
