In Regulation and Development Jean-Jacques Laffont provides the first theoretical analysis of regulation of public services for developing countries. He shows how the debate between price-cap regulation and cost of service regulation is affected by the characteristics of less developed countries (LDCs) and offers a positive theory of privatization that stresses the role of corruption. He develops a new theory of regulation with limited enforcement capabilities and discusses the delicate issue of access pricing in view of LDC's specificities. In the final chapter he proposes a theory of separation of powers which reveals one of the many vicious circles of underdevelopment made explicit by the economics of information. Based on organization theory and history, and using simple empirical tests wherever possible, Professor Laffont offers a comprehensive evaluation of the different ways to organize the regulatory institutions and opens up a rich new research agenda for development studies.
'In this impressive manuscript, Jean Jacques Laffont shows why the regulation of infrastructure services is crucial to achieve equitable and sustainable expansion of infrastructure services in the poorest countries of the world. This new book by one of the fathers of the modern theory of regulation offers a huge first step towards a theory of regulation of network industries for developing countries and provides preliminary empirical tests of this theory. It opens a huge new research agenda for academics and helps practitioners improve their ability to provide effective policy advice. It is a required reading for anyone claiming to care for the effectiveness of the delivery of public services in developing countries.' Antonio Estache, Senior Economic Advisor, The World Bank 'The weak performance of public utilities and infrastructure in developing countries has been a serious drain on resources, a drag on growth and an obstacle to poverty reduction. The factors behind this weak performance are also those which limit the ability to regulate private monopolies in an effective and fair way. Thus understanding the problems of regulation and development is fundamental to policies shaping growth and poverty reduction. This book, by one of the most distinguished economic theorists of our time, is of great importance in providing a rigorous and thoughtful analysis of these crucial issues, which takes account of the practicalities of policy and delivery in developing countries.' Professor Nicholas H. Stern, FBA 2nd Permanent Secretary, HM Treasury and Head of the UK Government Economic Service 'An unusual combination of wide-eyed realism and advance theoretical grasp make this a unique and valuable text.' The Financial Regulator 'This book presents the first rigorous and careful analysis of these issues, opening up a huge new research agenda and taking account of the practicalities of economic policy in developing countries. I recommend this book to all advanced graduate students and researchers with an interest in incentive theory and development economics. Is it a must for policymakers that are concerned with the effectiveness of delivering public services in emerging and developing countries. It is only a matter of time before Laffont's book becomes part of the standard toolkit for both theorists and practitioners alike. ... his work will endure.' De Economist