Private investment and macroeconomic adjustment : an overview

This paper reviews current investment theories, recent models linking macroeconomic policies and private investment, and the effect of uncertainty and credibility on irreversible investment decisions. Empirical studies on the subject are also reviewed, and the general implications of this literature for the design of growth-oriented adjustment programs are discussed.Economic Theory&Research,Environmental Economics&Policies,International Terrorism&Counterterrorism,Financial Intermediation,Banks&Banking Reform

An empirical macroeconomic model for policy design : the case of Chile

The authors construct, estimate, and simulate a macroeconomic model for Chile. This model allows aggregate supply and demand factors to interact in determining such key economic variables as inflation, the real wage, the real exchange rate, real output and employment, and the current account balance. The model ensures the consistency of different aggregates by imposing the relevant budget constraints on the fiscal sector, the central bank, and the balance of payments. To this consistent framework, the model adds behavioral equations with sound analytical foundations. The authors use model simulations to explore the effects of domestic policies and external shocks (like a balanced-budget fiscal expansion, a policy of increased growth in minimum wages, a fall in world copper prices, and an oil price shock). These simulations help illustrate the effects of economic policies and external factors that shape current policy discussions in Chile.Economic Theory&Research,Environmental Economics&Policies,Economic Stabilization,Macroeconomic Management,Inequality

Adjustment policies and investment performance in developing countries : theory, country experiences, and policy implications

The authors analyze the response of private and public investment to external shocks, macroeconomic adjustment, and structural reform in three sets of countries: (a) countries that pursued structural reform and liberalization in Latin American in the 1970s (Chile) or the 1980s (Mexico and Bolivia); (b) countries that experienced severe macroeconomic instability and did not pursue macroeconomic reform (Argentina and Brazil); and (c) East Asian countries with high-growth, outward-oriented, state-active economies that adjusted to the shocks of the 1980s and maintained high growth, low inflation, and remarkable macroeconomic stability (Korea, Singapore and Thailand). Drawing on the literature and their economic analysis of the determinants of private investment in developing countries using cross-country data for 1972-87, the authors concluded that: (a) macroeconomic stability and policy credibility are essential for achieving a strong investment reponse; (b) the sequence of adjustment measures is important; (c) even well-designed, consistent adjustment programs might have to overcome a lack of credibility, especially in their early stages; and (d) even if policy changes are perceived as permanent, inadequate infrastructure may pose a significant obstacle to the recovery of private investment.Environmental Economics&Policies,Economic Theory&Research,Trade and Regional Integration,Macroeconomic Management,Financial Intermediation

Do regulation and institutional design matter for infrastructure sector performance ?

This paper evaluates the impact of economic regulation on infrastructure sector outcomes. It tests the impact of regulation from three different angles: aligning costs with tariffs and firm profitability; reducing opportunistic renegotiation; and measuring the effects on productivity, quality of service, coverage, and prices. The analysis uses an extensive data set of about 1,000 infrastructure concessions granted in Latin America from the late 1980s to the early 2000s. The analysis finds that as the theory indicates, regulation matters. The empirical work here reported shows that in three relevant economic aspects-aligning costsand tariffs; dissuading renegotiations; and improving productivity, quality of service, coverage, and tariffs-the structure, institutions, and procedures of regulation matter. Thus, significant efforts should continue to be made to improve the structure, quality, and institutionality of regulation. Regulation matters for protecting both consumers and investors, for aligning closely financial returns and the costs of capital, and for capturing higher levels of benefits from the provision of infrastructure services by the private sector.Emerging Markets,Debt Markets,Private Participation in Infrastructure,Infrastructure Economics,Infrastructure Regulation

The impact of privatization on the performance of the infrastructure sector : the case of electricity distribution in Latin American countries

The authors analyze the impact of privatization on the performance of 116 electric utilities in 10 Latin American countries. The analysis makes a number of contributions to the literature on changes in infrastructure ownership. First, this is the first systemic analysis of the impact of privatization on the distribution of the electricity sector. Second, it constructs an unbalanced panel data set of key indicators for each country. Third, it includes a broader-than in past studies-range of indicators, such as output, employment, productivity, efficiency, quality, coverage, and prices, offering a fuller picture of the effects of privatization on consumers. Fourth, this research covers a longer period of time, and evaluates three stages-before, transition, and after-allowing for the identification of the short- and long-run effects of privatization, as opposed to previous analyses'short time series data that do not identify long-run outcomes. Finally, the counterfactual is considered through the analysis in trends. The authors apply two different methodologies. The first methodology uses means and medians from each period and tests the significance of the changes between periods. The second methodology consists of an econometric model that captures firm fixed effects, firm-specific time trends, and heteroscedasticity corrections. When needed, the authorsused firm-specific time trends to better understand the outcomes. The results suggest that changes in ownership generate significant improvements in labor productivity, efficiency, and product and service quality, and that most of those changes occur in the transition period. Improvements in the post transition period-beyond two years after the change in ownership-are much more modest.Economic Theory&Research,Energy Production and Transportation,Public Sector Economics&Finance,Labor Markets,Science Education

Regulatory governance and sector performance : methodology and evaluation for Electricity distribution in Latin America

This paper contributes to the literature that explores the link between regulatory governance and sector performance. The paper develops an index of regulatory governance and estimates its impact on sector performance, showing that indeed regulation and its governance matter. The authors use two unique databases: (i) the World Bank Performance Database, which contains detailed annual data for 250 private and public electricity companies in Latin America and the Caribbean; and (ii) the Electricity Regulatory Governance Database, which contains data on several aspects of the governance of electricity agencies in the region. The authors run different models to explain the impacts of change in ownership and different characteristics of the regulatory agency on the performance of the utilities. The results suggest that the mere existence of a regulatory agency, regardless of the utilities'ownership, has a significant impact on performance. Furthermore, after controlling for the existence of a regulatory agency, the ownership dummies are still significant and with the expected signs. The authors propose an experience measure in order to identify the gradual impact of the regulatory agency on utility performance. The results confirm this hypothesis. In addition, the paper explores two different measures of governance, an aggregate measure of regulatory governance, and an index based on principal components, including autonomy, transparency, and accountability. The findings show that the governance of regulatory agencies matters and has significant effects on performance.National Governance,Infrastructure Regulation,Governance Indicators,Banks&Banking Reform,Emerging Markets

Governance in state-owned enterprises revisited : the cases of water and electricity in Latin America and the Caribbean

This paper studies the governance structure of state-owned enterprises in the water and electricity sectors of Latin America and the Caribbean. Through a unique dataset, the paper compares 44 leading state companies of the region based on an aggregate measure of corporate governance and six salient aspects of their design: board, chief executive officer, performance orientation, management, legal framework, and transparency/disclosure. The results indicate the need for improvement in areas such as the selection and appointment of directors to the board and the performance-orientation of the enterprises. The paper also highlights the importance of discussing the management of state-owned enterprises in the wider context of public sector governance, with particular focus on accountability. Moreover, it recognizes the role of accountability as central in the management of state-owned enterprises, recommending a better understanding of regulation and performance management. The paper finds a positive correlation between corporate governance and the utilities'performance. Among the different aspects of corporate governance, performance orientation and professional management seem to be the highest contributors to well-performing state-owned enterprises. State-owned enterprises in the electricity sector show higher governance levels than those in the water sector.National Governance,Corporate Law,Private Participation in Infrastructure,Governance Indicators,Banks&Banking Reform

Docosahexaenoic acid promotes photoreceptor differentiation without altering Crx expression

PURPOSE: The precise molecular cues required for photoreceptor development are still unknown. Pax6 and Crx are essential during early retinal development and for photoreceptor differentiation, respectively. The lipid molecule docosahexaenoic acid (DHA) has also been shown to promote photoreceptor differentiation. Pax6 expression during the early steps in photoreceptor development and whether the mutual contribution of Crx and DHA enhances photoreceptor differentiation were investigated. METHODS: Neuroblast proliferation, Crx, and Pax6 expression were investigated in rat retinas in vivo and in neuronal cultures with or without DHA. BrdU incorporation, nestin and opsin expression, apical differentiation, and axonal outgrowth were determined by phase microscopy and immunochemistry. RESULTS: Pax6 expression occurred in all proliferating retinal neuroblasts in vivo; however, after their last mitotic division, photoreceptors stopped expressing Pax6 and started expressing Crx. In vitro, photoreceptor progenitors also showed a switch from Pax6 to Crx expression immediately after they exited the cell cycle and started differentiation. In contrast, those progenitors differentiating into amacrine neurons continued expressing Pax6 and did not express Crx. Most postmitotic photoreceptors expressing Crx showed little axon development and few of them expressed opsin. The addition of DHA dramatically increased differentiation in Crx-positive photoreceptors, enhancing opsin expression, apical differentiation, and axonal outgrowth, without affecting Crx expression. CONCLUSIONS: The results suggest that Pax6 and Crx expression are mutually exclusive during photoreceptor differentiation. Onset of Crx expression may provide a permissive stage that is essential to initiate photoreceptor differentiation, but additional support of DHA, among other environmental signals, is necessary to accomplish further differentiation.Fil: Garelli, Andres. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Bahía Blanca. Instituto de Investigaciones Bioquímicas de Bahía Blanca. Universidad Nacional del Sur. Instituto de Investigaciones Bioquímicas de Bahía Blanca; ArgentinaFil: Rotstein, Nora Patricia. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Bahía Blanca. Instituto de Investigaciones Bioquímicas de Bahía Blanca. Universidad Nacional del Sur. Instituto de Investigaciones Bioquímicas de Bahía Blanca; ArgentinaFil: Politi, Luis Enrique. Consejo Nacional de Investigaciones Científicas y Técnicas. Centro Científico Tecnológico Conicet - Bahía Blanca. Instituto de Investigaciones Bioquímicas de Bahía Blanca. Universidad Nacional del Sur. Instituto de Investigaciones Bioquímicas de Bahía Blanca; Argentin