Regulations and Technology Diffusion: Cross Subsidies and Digital Infrastructure Creation

Using contemporary historical data, the analysis has examined the impact of cross‐subsidization on technology diffusion within telecommunications networks for local exchange sector telecommunications firms in the United States for the years 1995 to 2000. Firms obtaining greater cross‐subsidies engage in greater technology diffusion via network modernization using digital technologies. Contingent on the institutional setting, cross subsidies have risen. These amounts have been put to relevant use in the diffusion of technology via deployment of digital infrastructure. The principles of subsidization are considered negatively as they have presumed anti‐competitive consequences. In technology diffusion they have played a positive role, as the evidence shows. From a radical subjectivist perspective, cross subsidies generate financial capital for firms, which permits them to deploy high quality technology investments such as broadband and these investments can be used for entrepreneurial experiments in providing several customer services.     

Bank competition, financial reform, and institutions: The importance of being developed

In this paper, I estimate the degree of market power at the bank-level for 84 banking systems worldwide. Subsequently, I analyze the sources of bank competition, placing emphasis on the impact of financial reform and the quality of institutions. I find that financial liberalization policies reduce the market power of banks in developed countries with advanced institutions. In contrast, banking competition does not improve at the same pace in countries with weaker institutions and a lower level of institutional development. The results hold across a wide array of identification tests and estimation methods. The main policy implication to be drawn is that a certain level of institutional development is a precondition for the success of reforms aimed at enhancing the competition and efficiency of banking markets.     

An econometric assessment of telecommunications prices and consumer surplus in Mexico using panel data

We analyze telecommunications prices in Mexico by using a panel data of countries similar to Mexico to estimate demand models for mobile and fixed-line telecommunications. We find that Mexico’s actual mobile and fixed-line prices are below the predicted prices based on similar countries’ prices. Mexican consumers are paying lower prices than what one would expect based on comparisons of comparable countries. We calculate that in 2011 Mexican consumers received at least $4–$5 billion (USD) in consumer surplus from these lower mobile prices and in 2010 they received over $1 billion (USD) in consumer surplus from these lower fixed-line prices. These findings are in contrast to the general perception that concentrated telecommunications markets in Mexico are resulting in high prices and harming consumers.     

The impact of infrastructure and service-based competition on the deployment of next generation access networks: Recent evidence from the European member states

This work identifies the most important determinants of next generation access (NGA) network deployment, using data from the EU27 member states for the years 2005–2011. Our results indicate that the more service-based competition is pronounced the more negative is the impact on NGA deployment, while competitive pressure from broadband cable and mobile affects NGA deployment in an inverted U-shaped manner. We further find that there are severe adjustment costs and stickiness towards the desired long-term level of NGA infrastructure. It appears that the approach of the European Commission to force service-based competition via cost-based access regulation will not elicit the huge new investment needed for a comprehensive NGA roll-out.     

Trade and product market policies in upstream sectors and productivity in downstream sectors: Firm-level evidence from China

This paper explores the heterogeneous productivity impact of trade, product market and financial market policies over the last decade in China. The paper makes a critical distinction between downstream and upstream industries, focusing on the indirect effects of regulation in upstream industries on firm performance in downstream manufacturing industries. We identify the differential effect of these policies on firm productivity growth depending on how far incumbents are relative to the technological frontier. Trade and product market reforms are found to deliver stronger gains for firms that are closer to the industry-level technological frontier, while the reverse holds for financial market reforms. The key conclusion that can be derived from the empirical analysis is that further product, trade and financial market reforms would bring substantial gains in China and could therefore speed up the convergence process. Taken at face value, the empirical estimates would imply that aligning product, trade and financial market regulation to the average level observed in OECD countries would bring aggregate manufacturing productivity gains of respectively 9%, 3% and 6.5% after 5 years.     

Productivity drivers of infrastructure companies: Network industries utilizing economies of scale in the digital era

What drives the productivity dynamics of infrastructure companies? Using a panel of firms in 14 countries, we study total factor productivity (TFP) enhancers of utility and network services companies. We find that moving TFP closer to the technological frontier drives productivity growth at higher speeds in Asian countries than in European countries. We also find that financial leverage exerts a positive effect on TFP growth for larger infrastructure firms and that more financially developed countries utilize economies of scale through better use of financial resources. Large utility and transportation companies display a higher rate of TFP growth, indicating that a competition policy to encourage M&As would be prudent for the utility/transportation sectors to maximize economies of scale. In contrast, we find diseconomies of scale for energy companies in some countries. Moreover, young network firms improve TFP growth faster than their peers in countries with fewer product market regulations. Therefore, policies should remove entry barriers while facilitating the departure of old and low-productivity firms from network markets. Finally, policymakers should offer well-targeted fiscal incentives for intangible investments to boost TFP because the accumulation of intangible assets such as digital technology promotes more scale economies through network effects.     

Globalization and financial development

This paper argues that globalization is a key factor in stimulating institutional reforms in developing countries that promote financial development and economic growth. Advanced countries can help in this process by supporting the opening of their markets to goods and services from emerging-market countries. By encouraging these countries to increase their participation in global markets, advanced countries can create exactly the right incentives for developing countries to implement the reforms that will enable them to have high economic growth.     

Political institutions and telecommunications

It has traditionally been argued that the development of telecommunications infrastructure is dependent on the quality of countries' political institutions. We estimate the effect of political institutions on the diffusion of three telecommunications services and find it to be much smaller in cellular telephony than in the others. By evaluating the importance of institutions for technologies rather than for industries, we reveal important growth opportunities for developing countries and discuss venues for alleviating differences between countries in international telecommunications development.     

Technological Progress and Economic Growth in Sub-Saharan Africa: Evidence from Telecommunications Infrastructure

This paper investigates the impact of telecommunications infrastructure in Sub-Saharan Africa. We use the World Development Indicators database and apply the instrumental variable-generalized method of moments to a panel of 47 countries over the period 1993–2012. The results show that the Internet and mobile phones have contributed to economic growth. A one percentage point increase in Internet and mobile phone usage raises growth by 0.12 and 0.03 percentage points, respectively. Overall, the results suggest that the development of telecommunications infrastructure fosters economic growth in Sub-Saharan Africa. With much room for potential growth enhancement of telecommunications infrastructure, policies to expand access or reduce cost should be strongly encouraged by African governments, particularly as far as the Internet is concerned.     

Telecommunications Reforms In Malaysia

The article examines the range and scope of physical and structural changes that have taken place in the telecommunications sector in Malaysia in the past 15 years. It reviews the main policy reforms that have shaped the sector, including corporatization and privatization, and liberalization in fixed line and cellular services. The article documents the increase in competition, particularly in the cellular phone service market. Major regulatory reforms were introduced in the 1990s with the passage of the Communications and Multimedia Act and the establishment of the Malaysia Communications and Multimedia Commission. The key principles for regulating the sector are reviewed, including those directed towards economic regulation and consumer protection. With the absence of a formal competition law in Malaysia, the onus for addressing competition issues in the telecommunications sector rests with the sectoral regulator.     

Economic reforms and human development: evidence from transition economies

Do market-oriented economic reforms result in higher levels of human well-being? This article studies the impact of macro-level institutional and infrastructure reforms on the economic, educational and health dimensions of human well-being among 25 transition economies. We use panel data econometrics based on the LSDVC technique to analyse the effects of market-oriented reforms on the human development index (HDI), as a measure of human well-being, from 1992 to 2007. The results show the complexity of reform impacts in transition countries. They show that institutional and economic reforms led to positive economic effect and significant impacts on other dimensions of human development. We find some positive economic impacts from infrastructure sectors reforms. However, not every reform measure appears to generate positive impacts. Large-scale privatizations show negative effects in health and economic outcomes. The overall results show the importance of the interaction among different reform measures and the combined effect of these on human development.     

Effects of financial liberalization on financial market development and economic performance of the SSA region: An empirical assessment

This study investigates the role of financial liberalization in promoting financial deepening and economic growth in Sub-Saharan African countries (SSA). We apply the more efficient system GMM estimator in dynamic panel data that combines first difference and original level specification to deal with the problems of weak instruments. Our dataset covers 21 countries in Sub-Saharan Africa over the period of 1981–2009.Additionally, the paper sought to examine both the direct and indirect impacts of financial liberalization policies on economic growth and financial deepening using a much more comprehensive and recent financial liberalization dataset. The econometric results suggest that, on average, financial liberalization is negatively associated with income growth in SSA region. Our findings provide support for the skeptical empirical view of financial liberalization in emerging markets, which show that liberalization, by itself, might be associated with lower economic growth through leading to destabilization, stimulating domestic capital flight and increasing the risk of financial fragility. However, the research finds that financial liberalization does indeed impact positively on financial deepening and resource mobilization in SSA region, after controlling for key macroeconomic factors such as institutional quality, fiscal imbalances and inflation. In fact the study reports a stronger reforms effect for countries that have stronger legal institutions, protection of property rights and higher human capital. Policy-wise, the study finds that institutional and human capital factors are important in explaining growth and financial development; therefore, it is necessary for SSA governments to promote a stronger and more transparent institutional development as we move forward.     

Economic determinants of global mobile telephony growth

This study examines the substitution effect between fixed-line and mobile telephony while controlling for the consumption externality associated with telephone networks. A dynamic demand model is estimated using a global telecommunications panel dataset comprised of 56 countries from 1995–2000. Estimation results show the presence of a substantial substitution effect. Additionally income and own-price elasticities are reported. Analysis of impulse responses for price, income and network size indicate substantial mobile telephone growth is yet to be realised. However, price ceilings imposed in the fixed-line network can retard the growth of the mobile network.     

Institutional Determinants of Financial Development in MENA countries

Developed and well regulated financial markets are usually seen as a precondition for an efficient allocation of resources and can foster long term economic growth. This paper explores the institutional determinants for financial development in the countries of the Middle East and North African (MENA) region. Institutional conditions are from the International Country Risk Guide. Panel‐econometric techniques are applied to assess the development in the banking sector and the stock market. As a main finding, institutional conditions are important in both financial segments, even after controlling for standard macroeconomic determinants and fixed effects. For the banking sector, corruption seems to be most decisive. For the stock market, the impact of corruption and law and order appear to be relevant. While per capita income and inflation do not seem to play a vital role, openness to foreign trade is quite important for all areas of financial development. Hence, overall, faster real economic integration is of key policy priority to improve financial development as a condition for higher GDP growth. Better law and enforcement practices and anti‐corruption policies are strategies to accompany this process.     

Trade imbalance in international message telephone services

An econometric model is estimated to identify determinants of trade imbalance in international message telephone services markets. Results indicate that asymmetric market structure is important in explaining bilateral market imbalances for high income country pairs. For low and high income country pairs, GDP per capita is the dominant cause of traffic imbalances. The findings suggest that telecommunications liberalization policies are effective in reducing distortions in international traffic flows and settlement payments. However, liberalization should be accompanied by developmental programmes that enhance income per capita and telecommunications network investment in developing countries. Such programmes may be effective in providing a more equitable distribution of the gains from telecommunications reform across countries.     

Disentangling liberalization and privatization policies: Is there a political trade-off?

We empirically investigate the political determinants of liberalization and privatization policies in six network industries of 30 OECD countries (1975–2007). We unbundle liberalization and privatization reforms and study their simultaneous determination in a two-equation model. Unlike previous studies, we account for cross-effects between the two pro-market measures. Our findings unveil that both right-wing and left-wing governments implement liberalizations and privatizations, showing a common trend under the so-called neo-liberalism wave. However, although the privatization rate is higher than liberalization in right-wing environments, the opposite occurs under left-wing governments. We argue that ideological cleavages still affect pro-market reforms, particularly the combination of privatization and liberalization policies. We conclude that different deregulation patterns should be expected under governments characterized by different political ideologies. Our results shed new light on the literature investigating the political-economic rationale underpinning pro-market choices.     

The Efficiency of China's Banking Industry and the Determinants

The recent global financial crisis highlights the importance of a sound financial sector for economic development. This paper evaluates the economic efficiency of China's banking industry and investigates the determinants of this efficiency. Our analysis shows that the average economic efficiency of joint-stock commercial banks is highest, followed by the ‘Big Four’ state-owned commercial banks and city commercial banks. The economic inefficiency of these banks during the past 15 years was mainly caused by technical inefficiency, and this technical inefficiency was mainly caused by scale inefficiency. Using the scores of efficiency as dependent variables, the paper also comprehensively studies the impact of (1) the characteristics of individual banks, (2) the characteristics of the whole banking industry and (3) macroeconomic factors on banking efficiency. The results suggest a number of factors that banks can work on to improve efficiency and lend support to deepening reforms in the Chinese banking industry, including regulatory reforms that require capital adequacy in a more strict way, reforms that introduce more competition and, more broadly, reforms that aim at establishing institutions that can truly commercialize Chinese banks. Last but not least, the efficiency of banking depends on healthy growth of the overall economy.     

Institutions and concentration

In a new dataset of 1.3 million firms from over 100 countries, I establish a number of regularities in cross-country differences in economic concentration. Concentration of sales and employment is substantially higher in smaller countries and in less-developed countries; these two factors alone explain roughly half the cross-country variation in concentration. Nevertheless, a number of institutional factors offer additional explanatory power for concentration. Concentration is higher in countries with higher entry costs for new firms, in countries with weaker antitrust policy, in countries with less financial development, in countries with weaker rule of law, and in countries with more burdensome regulation. Weak institutions are associated with higher concentration especially in industries that do not have naturally high levels of concentration. In addition, the relationships between institutions and concentration are more pronounced in nontradable and investment-intensive industries, suggesting that natural barriers to competition facilitate the monopolization of sectors especially when institutions are weak.     

Financial reforms and capital flows to emerging Europe

Analysis of 18 emerging European economies finds domestic financial reforms to be positively associated with net capital inflows. Controlling for standard determinants of capital flows, we find banking sector reforms in particular to be consistent with higher net financial inflows, whereas no such correlation is found for security market reforms or for indicators of financial depth. Additional net inflows are reaped by the EU accession countries. Countries with more reformed banking sectors receive significantly higher FDI and “other” investment net inflows; this is also found for gross financial inflows, but not for gross outflows.     

Financial development,financial liberalization and social capital

The relationship between financial liberalization policies and financial development is controversial. The impact of these policies differs greatly across countries. In the literature, the quality of formal institutions has been identified as an important source of this heterogeneity, as countries with a weak institutional environment generally fail to benefit from financial liberalization. Using panel data covering 82 countries for the period 1973–2008, we find evidence that social capital may substitute for formal institutions as a prerequisite for effective financial liberalization policies. In particular, we find that during the post Washington-consensus period countries with a high prevailing level of social capital can ensure that financial liberalization positively influences financial development, despite the poor quality of their formal institutions.