International Handbook on the Economics of Corruption, Volume Two
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International Handbook on the Economics of Corruption, Volume Two

Edited by Susan Rose-Ackerman and Tina Søreide

A companion volume to the International Handbook on the Economics of Corruption published in 2006, the specially commissioned papers in Volume Two present some of the best policy-oriented research in the field. They stress the institutional roots of corruption and include new research on topics ranging from corruption in regulation and procurement to vote buying and private firm payoffs.
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Chapter 6: Public versus Private Governance and Performance: Evidence from Public Utility Service Provision

Maria Vagliasindi


1 Maria Vagliasindi 1. Introduction In the public utility sector the control of corruption should never be an end in itself. Rather, programs to limit corruption and improve governance must focus on their connection to improved service provision. Accordingly, governance reform should not concentrate only on compliance with laws and rules or on initiatives to detect and punish corruption. Rather, efforts to strengthen governance should aim to meet customers’ legitimate demands for better performance and for more costeffective infrastructure service delivery. Governance arrangements need to motivate politicians, bureaucrats, and utility managers to provide the services customers need in ways that reflect the actual costs of their provision. Corruption frequently inflates the costs of utilities. Thus, governance systems that push the reported costs of such services closer to real economic opportunity costs will help to reduce the magnitude and incidence of corruption and act as a powerful tool to improve performance. State-owned enterprises (SOEs) dominate the market in such areas as electricity, gas, water, and railways. Despite the push for privatization and private participation from 1990 to the present, a large proportion of utility services are still delivered by SOEs in the developing regions of the world. An extensive body of literature highlights the successes and failures of private sector participation in infrastructure, but much recent research focuses on the successes and failures of the public sector (Gómez-Ibáñez, 2007 and Vagliasindi, 2011). Many governance controls were tailored to constrain private sector providers. These systems, together with other social developments,...

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