Rules, institutions, or both? Estimating the drivers of telecommunication investment in Latin America

Abstract

El paper analiza el impacto de las regulaciones y la calidad institucional en la inversión en telecomunicaciones en América Latina. Los niveles de inversión en la región se sitúan por detrás de los de las economías avanzadas, lo que está impidiendo la transformación digital. Utilizando una base de datos construida para este análisis, confirmamos la relevancia de la calidad regulatoria e institucional. También verificamos que buenas instituciones permiten contrarrestar en parte los efectos de malas regulaciones, y viceversa. El impacto es mas fuerte cuando buenas regulaciones e instituciones van en conjunto.

This paper analyses the impact of regulation and institutions on telecommunications investment in Latin America. The investment levels of the region lag behind those of advanced economies and are impeding substantial progress on digital transformation. Using a database built for this analysis, which covers nearly 90 percent of Latin American countries for 2007–2017, we confirm the relevance of regulatory and institutional frameworks to explain investment trends in the sector. We also show that a good institutional quality contributes significantly to counteracting partially a bad regulatory environment, and vice versa. However, the impact is significantly stronger when good regulation and institutions interact, suggesting that comprehensive reforms to improve institutions and the regulatory environment would pay off. In particular, improving cybersecurity and piracy control regulation, and fighting corruption and undue influence stand out as the priorities to increase telecommunication investment in Latin America.