JPAM Featured Article: "Policy Reform and the Problem of Private Investment: Evidence from the Power Sector"
November 2, 2016 08:00 AM
As part of our ongoing effort to promote JPAM authors to the APPAM membership and the public policy world at large, we are asking JPAM authors to answer a few questions to promote their research article on the APPAM website.
By: Johannes Urpelainen, PhD
What was the genesis/history of the idea for your research?
Power sector reforms play an important role in economic development, but governments have faced political difficulties in implementing such reforms. Economists see a lot of opportunities for powerful reforms across the world, but governments, fearing a political backlash, hesitate to make changes in their policies. Given this conundrum, we were interested in whether a relatively simple reform, such as allowing independent power producers to generate and sell electricity, would be enough to reap the benefits. When we found data on power sector reforms over time and private investments in the power sector, we realized that we have an opportunity to test our hypothesis. When we saw how large the benefits were in the initial analysis, we decided to develop the analysis into a full paper.
What is the main conclusion that becomes evident from your research? (Or, what is our main takeaway?)
Our research shows that simple legislation to enable independent power production increases private investment in electricity generation by more than an order of magnitude. By enacting policies that allow independent power production, governments in developing countries can begin to bridge the gap between the supply and demand of electricity, even if more comprehensive reforms are not politically feasible.
What are some of the more interesting or surprising findings/conclusions, you discovered during this process?
The first big surprise was how big the benefits from independent power production are. This type of reform has drawn little attention in the public debate, but it turns out to be a powerful way to improve the quality of electricity supply. The second big surprise that such reforms are effective even in countries with few constraints on executive power, such as authoritarian regimes. The reforms seem to be sufficiently credible on their own to encourage private investments.
Johannes Urpelainen, PhD (@jurpelai) is Associate Professor of Political Science at Columbia University. His research focuses on international cooperation, environmental politics, and energy policy. His first book, Cutting the Gordian Knot of Economic Reform (Oxford University Press), draws on quantitative tests and extensive case studies to show that leaders in developing countries have used preferential trading agreements with the European Union and the United States to secure domestic political support and enhance the implementation of initially controversial reforms. The results from the book have been featured and used by various research and policy organizations, including the United Nations. The author of more than a hundred refereed articles, Professor Urpelainen's research has been widely published in leading social science journals, such as The American Journal of Political Science, International Organization, and The Journal of Politics. Much of Professor Urpelainen's current research focuses on finding practical solutions to the political problems surrounding sustainable development in emerging economies. These projects have brought him to a number of countries in Africa, Asia, and Latin America. In his spare time, Professor Urpelainen loves to read biographies.
Check out this and other Journal of Policy Analysis and Management articles online.