Interest Groups, Veto Points and Electricity Infrastructure Deployment

45 Pages Posted: 12 Aug 2004

See all articles by Witold J. Henisz

Witold J. Henisz

University of Pennsylvania - Management Department

Bennet A. Zelner

Duke University's Fuqua School of Business

Date Written: July 2004

Abstract

In this paper, we examine the effects of interest group pressure and the structure of political institutions on infrastructure deployment by state-owned electric utilities in a panel of 78 countries during the period 1970-1994. We consider two factors that jointly influence the rate of infrastructure deployment: (1) the extent to which the consumer base consists of industrial consumers, which are capable of exerting discipline on political actors whose competing incentives are to construct economically inefficient white elephants to satisfy the demands of concentrated geographic interests, labor unions and construction firms; and (2) veto points in formal policymaking structures that constrain political actors, thereby reducing these actors' sensitivity to interest group demands. A higher fraction of industrial customers provides political actors with stronger incentives for discipline, reducing the deployment of white elephants and, thus, the infrastructure growth rate, ceteris paribus. Veto points reduce political actors' sensitivity to interest group demands in general and, thus, moderate the relationship between industrial interest group pressure and the rate of infrastructure deployment.

Keywords: Electricity, institutional environment, investment, regulation, interest group, state-owned enterprise

JEL Classification: L94, L32, F21

Suggested Citation

Henisz, Witold Jerzy and Zelner, Bennet A., Interest Groups, Veto Points and Electricity Infrastructure Deployment (July 2004). Available at SSRN: https://ssrn.com/abstract=575641 or http://dx.doi.org/10.2139/ssrn.575641

Witold Jerzy Henisz (Contact Author)

University of Pennsylvania - Management Department ( email )

The Wharton School
Philadelphia, PA 19104-6370
United States
215-898-0788 (Phone)
215-898-0401 (Fax)

HOME PAGE: http://www-management.wharton.upenn.edu/henisz/

Bennet A. Zelner

Duke University's Fuqua School of Business ( email )

100 Fuqua Drive
Box 90120
Durham, NC 27708-0120
United States

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