The social impact of privatization and the regulation of utilities in Peru

Type Report
Title The social impact of privatization and the regulation of utilities in Peru
Publication (Day/Month/Year) 2001
Almost five years after privatization took place in electricity and telecommunications, and major reforms had been carried out in the administration of water, the results is not clear a priori. In order to elucidate the panorama, this research tries to assess the consumption and welfare impacts of privatization on Peruvian urban households. The objective is, therefore, to asses the income distribution effects of the transformation and to determine which type of households bear a greater portion of the burden or enjoy most of the benefits of price changes brought about by privatization. To accomplish this objective, three complementary methodologies are followed. The first consists of calculating concentration curves to show how services are distributed among the population. The second methodology, based on the proposal by Waddams Price and Hancock (1998), measures changes in household expenditures associated with changes in structure and prices levels. Finally, demand equations are estimated for the different utilities under study, by applying a two-stage Heckman methodology to correct for the probability of having access to the service. Using the elasticities estimated with this two-stage procedure, we calculate the welfare changes associated with the consumption of the utilities

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