ASi" kUCTURE FlOR DEVELOPMENT

structure and explain the importance of infrastruc- The presiption for allowing all new entry and
tuSe in the context of European integration; Leevre easing barriers to exit was stated by Baumol, Pan-
1989 provides a wider discussion applicable to . zar. and Willig 1988. The example of competition in
OECD countries, focusing on transporL CaGlEaud cellular telephone provision is from the ntenmaand
Quinet 1991 and 1992 propose a useful method- tional Fnance Corporation background paper.. Bauology
to assess the effectiveness of incentives in the mol and Lee 1991 noted the desirability of allowing
design of various types of contracts between the large manufachurers to sell their excess generating
French government and bus operators. Mougeot capadty, Triche, Meiia, and Idelovitch 1993 proand
Naegellen 1992 extend some of this discussion vided the examples of concessions in Buenos Aires
to more general public procurement policies, and Caracas
Pestieau .and TuLkens 1992 survey the determinants The case for competition for the market is articuof
public enterprise performance- Seabright 1993 lated most forcefully by Demsetz 1968. WilLiamson
provides important insights on public provision of 1976 cautioned that the franchisee (winner of the
infrastructure services in South Asia. Tirle 1992- competition) has incentives to neglect maintenance
presents a more general theory of the internal orga- of assets toward the end of the contract period.
nization of government and provides explanations Kuhn, Seabright, and Smith 1992 review research on
for some of the issues raised in this chapter. Useful competition.
matenal illustrating the benefits of appropriate tech- Gains from pnvatization are documented bv
nology choices can be found in Edmonds and de Galal and others forthcoming and Vickers and Yar-
Veen 1992, Gaude and Miller 1992, Guichaoua 1987, row 1988. Infornative case studies and reviews of
and von Braun, Teldu, and Webb 1992. Information experience with privatization and competition are
on, labor redundancy was obtained from Svenar in Alexander and Corti 1993, Baumol and Sidak
and Terrell 1991,
1994, Fukui 1992, Im, Jalali, and Saghir 1993, Rama-
Overall the chapter benefited from detailed com- murti and Vernon 1991, Roland and Verdier 1993,
ments, suggestions, and inputs from Yao Badjo, and TaIcano 1992 Links between reform, privatiza-
John Blaxall, Jos6 Carbajo, Jacques Cellier, Nichola tion, and investment are descrbed in Besant-Jones
Ciss6, Pierre Guislain, rmothy Hau, John Ndllis, 1990a, Churchill 1993, and Helm. and Thompson
Znarak Shalizi, Sudhir Shetty, Vimaya Swaroop, 1991.
Louis Thompson, Kazuko Uchimura, Joris Van Der The discussion of i derconnection financng
Ven, and Carlos Velez, within the World Bank, and draws on the background note by Mitchell, on Baufrom
Jacques Cr4mer (stitut dEconomie Indus- moIl and Sidak 1994, and on personal communicatrielle,
'oulouse), Mathias DewatLipont and Richard tion from Henry Ergas and Dan Caun-SekaL
Schlirf (Universit6 Lilbre de Bruxelles), Paul Sea- Much literature exists on the different instubright
(Cambridge University), and Barrie Stevens ments of price and profit regulation. Recent sum-
(OECO).
manes of the underlying theory and experience can
Chnpter 3
be found in Braeutigam and Panzar 1993, Liston
1993, and the backgound paper by Sappington.
This chapter draws on academiic sources, back- Willig and Baumol 1987 discuss how competition
ground papers, journal publications, World Bank can be used as a guide for regulation. The theory of
and International Finance Corporation documents, yardstick competition is discussed by Shleifer 1985,
personal communications and comments, and ex- the Chilean power example is from Covarrubias
pert consultations both witiin and outside the and Maia 1993, the Chilean telecom example is from
World Bank.
Galal 1994, and the French example is from Lorrain
Sectoral unbundling irn the electric power sector 1992. Reviews of experience with regulation and
is discussed in Bemstein 1988 (Chile), Littledild regulatory reform are in Bennathan, Escobar, and
1992 (U.K.), and Tenenbaumn, Lock, and Barker 1992. Panagakos 1989, Carbajo 1993, Churchil 1992, Cor-
For railways see Moyer and Thompson 1992 and dukes 1990,- Guasch and Spiller 1993, and Vogel
Nilsson 1993; for telecommunications see Bruce, 1986.
Harrell, and Kovacs 1993.
For methods of involving consumers in regula-
The unintended consequences of regulation tion in industrialized countries see Triche 1993 and,
when substitute services are available are described in a developing country context, Paul 1993. On selfin
Viscusi, Vernon, and Harnington 1992 for the regulationby theindustry,see Gwilliam 1993 for the
United States and in the Kwong background paper case of urban transporL Regulation of quality is disfor
Hong Kong- cussed in Rovizzi and Thompson 1992
127