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UNIVERSITÀ DEGLI STUDI DI SIENA QUADERNI DEL DIPARTIMENTO DI ECONOMIA POLITICA Filippo Belloc Antonio Nicita Partisan Liberalizations. A New Puzzle from OECD Network Industries? n. 588 – Marzo 2010
Abstract - We investigate the political determinants of liberalization in OECD network industries, performing a panel estimation over thirty years, through the largest and most updated sample available. Contrary to traditional ideological cleavages, we find that right-wing governments liberalize less than left-wing ones. This result is confirmed when controlling for the existing regulatory conditions that executives find when elected. Furthermore, governments’ heterogeneity, proportional electoral rules, and European Union membership all show positive and statistically significant effects on liberalization. Our findings suggest that, despite the conventional wisdom, the political-economic rationale behind liberalization paths in network industries is far from being assessed. Keywords : Liberalization – Network Industries – Government heterogeneity and Partisanship – Electoral systems - Panel data JEL Classification D72, L50, P16, C23 Filippo Belloc , Dept. of Economics, University of Siena, Italy - [email protected] Antonio Nicita , Dept. of Economics, University of Siena, Italy - [email protected]
1 1. Introduction 1 One of the distinguishing features of the last three decades has been the wave of market-oriented policies experienced worldwide (Conway and Nicoletti, 2006; Armstrong and Sappington, 2006; Guriev and Megginson, 2007; Pitlik, 2007). In particular, in network industries, which cover crucial sectors for national economies such as passenger air transport, telecommunications, electricity, gas, post, rail and road, privatization and liberalization are among the market-oriented policies which registered the largest convergence across OECD countries. Beside the analysis of economic determinants (Vickers and Yarrow, 1991; Levy and Spiller, 1996; Newbery, 1997; 2002; Armstrong and Sappington, 2006), a large group of scholars have investigated the role of institutional and political determinants of market-oriented policy in network industries, following the ‘political economics’ approach (Persson and Tabellini, 2000; Persson, 2002; Besley and Case, 2003; Besley, Persson and Sturm, 2010). While the political economy of privatization in network industries has been largely investigated and measured, little of this literature, with some relevant exceptions, addresses the role of political parties and institutions as determinants of liberalization policy. In this paper we attempt to fill this gap, analyzing liberalization policies over the last three decades in seven OECD network industries, whose relevance is crucial both in terms of their impact on per capita consumption and as suppliers of intermediate inputs (Conway and Nicoletti, 2006). Liberalization here refers mainly to policy aimed at reducing economic, institutional and legal barriers to entry in sectors previously dominated by legal state-owned monopolies and in which access to essential facility

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