Government Concession Contracts in Chile: The Role of Competition in the Bidding Process

Over the last 12 years, Chile has been very successful in attracting private participation into the provision of Public Infrastructure. Private capital has gone into road infrastructure, ports and airports all over the country in the form of Concessions. The aim of the 1991 Concession Law, and that of the specific contracts associated with each project, has been to provide much-needed infrastructure efficiently and without committing government resources better employed elsewhere. Using the contracts of four infrastructure projects involving the private sector in Chile, we show that even though these projects and the Concessions Program are positively evaluated, design flaws in the auction setup directly or indirectly reduced competition in the bidding process, negatively affected performance, created incentives for ex-post renegotiation and precluded welfare maximization.Contracts, concessions, bidding

Error-correction Mechanism Tests for Cointegration in a Single-equation Framework

A new test is proposed for cointegration in a single-equation framework where the regressors are weakly exogenous for the parameters of interest. The test is denoted as an error-correction mechanism (ECM) test and is based upon the ordinary least squares coefficient of the lagged dependent variable in an autoregressive distributed lag model augmented with leads of the regressors. The limit distributions of the standardized coeffi cient and t-ratio versions of the ECM tests are obtained and critical values are provided. These limit distributions do not depend upon nuisance parameters but they depend on the number of regressors. Finally, we compare their power properties with those of other cointegration tests available in the literature and find the circumstances under which the ECM tests have a better performance.Publicad