Regulatory Politics

My first major project examines the politics of regulation in the developing world, focusing on the regulation of privatized infrastructure.  This project is anchored by my first book, Foreign and Domestic Investment in Argentina: The Politics of Privatized Infrastructure (Cambridge University Press, 2014), and includes a set of related articles and chapters (described below). This body of work examines informal supports for contracts in political environments with weak formal protections for property rights.  It also shows how studying utilities regulation allows us to better understand the welfare state in the developing world.

Foreign and Domestic Investment in Argentina: The Politics of Privatized Infrastructure (Cambridge University Press, 2014).

Political economy scholarship suggests that private sector investment, and thus economic growth, is more likely to occur when formal institutions allow states to provide investors with credible commitments to protect property rights. This book argues that this maxim does not always hold for infrastructure privatization programs in weak institutional environments. Rather, differences in firm organizational structure better explain in the viability of privatization contracts in weak institutional environments. Domestic investors - or, if contracts are granted subnationally, domestic investors with diverse holdings in their contract jurisdiction - work most effectively in the volatile economic and political environments of the developing world.  They are able to negotiate mutually beneficial adaptations to their contracts with host governments because cross-sector diversification provides them with informal contractual supports. These informal contractual supports provide more help to firms in negotiations with host governments than formal substitutes for strong domestic property rights protections, such as access to international arbitration. The book finds strong empirical support for this argument through an analysis of fourteen water and sanitation privatization contracts in Argentina and a statistical analysis of sector trends in developing countries.
Commentary on the book:
  • "It stands as a crucial response to the institutionalist approaches that have dominated studies of political economy in recent years and as a reminder of the value of field research and knowledge that can only be teased out of deep understanding of local contexts." - From review in Journal of Latin American Studies
  • "Post has written an exceedingly interesting book that goes beyond the by now somewhat tired, even if often correct, emphasis on impartial institutions as guarantors of property rights to inquire deeply into the political nature of investment . . . This book is a great contribution to the body of scholarship that tries to explain variation in public policy, economic outcomes, and 'varieties of capitalism' among developing countries. - From review in Latin American Politics & Society
  • "This is a rigorously researched and well-written book of interest to scholars working on the political economy of development, public policy, and international business.  Moreover, it has a practical message: Promoters of the ongoing negotiations on the controversial Transatlantic Trade and Investment Partnership, which puts formal property rights protection and international arbitration first, should take note."  -From review in Governance
  • "Post's book offers rich insights into the debates over private and public ownership models while avoiding polemics." -Social Science Matrix, U.C. Berkeley

Related Publications

“How Investor Portfolios Shape Regulatory Outcomes: Privatized Infrastructure After Crises.” 2016. World Development. 77: 328-345.  (with María Victoria Murillo)
Many developing countries privatized utilities during the 1990s. Their weak institutional environments, however, make them prone to crises that generate incentives for governments to renege on contractual commitments to investors. To understand variation in post-crisis regulatory outcomes in such contexts, scholars must consider investors’ prior choices regarding portfolio structure. Investors facing high reputational costs from exit are more likely to remain following expropriation, and those holding diverse assets in their contract jurisdiction, to secure compensation. These factors account for significant unexplained within-sector and subnational variation, for which we provide qualitative and quantitative evidence from Argentina’s water and electricity sectors following the 2001 crisis.

“Policy Traps: Consumer Subsidies in Post-Crisis Argentina.” 2015. Studies in Comparative International Development. 50(1): 98-120. (with Tomás Bril Mascarenhas) [Updated version in Spanish in Desarrollo Económico Vol. 54, No. 213: 171-202 (Sept. - Dec. 2014)]

Developing countries devote significant resources to lowering consumer prices for basic goods and services such as food and electricity. Theories of the welfare state only partially elucidate why consumer subsidy regimes grow so large and become entrenched. While the welfare state literature stresses how concentrated, organized beneficiary groups push for the expansion and protection of well-known programs such as pensions, the developing world’s consumers are atomized, and subsidies themselves are of low visibility. The size and durability of consumer subsidy regimes stem primarily from political uncertainty and price shocks that provide politicians with strong incentives to avoid blame for repeal. Over time, environmental pressures and fears of political backlash against repeal reinforce one another, increasing the fiscal burden subsidies impose and dramatically raising the political cost of program exit. In this sense, consumer subsidy programs come to form “policy traps”—initially modest policies that quickly grow and become entrenched, thereby greatly reducing politicians’ maneuvering room. We utilize this framework to analyze the meteoric growth and entrenchment of utility subsidies in post-crisis Argentina. In Argentina, subsidies grew despite the private provision of subsidized services—making it difficult for the government to claim credit—even in sectors with weakly organized interests.

“Home Court Advantage:  Investor Type and Contractual Resilience in the Argentine Water Sector.” 2014. Politics & Society.  42(1): 107-132.

A large body of scholarship in political economy suggests economic growth, and foreign direct investment in regulated industries in particular, is more likely to occur when formal institutions allow states to provide credible commitments regarding the security of property rights. In contrast, this article argues that we must instead examine differences in firm organizational structure and embeddedness to explain variation in the resilience of privatization contracts in weak institutional environments. Domestic investors—or, if contracts are granted at the subnational level, domestic investors with diverse local holdings—work most effectively in the developing world. Domestic investors are better able to negotiate mutually beneficial adaptations to their formal contracts with host governments because they can draw on informal contractual supports that derive from cross-sector diversification and embeddedness in the market. This article finds strong support for this argument through an analysis of fourteen water privatization contracts in Argentina.

“The Politics of ‘Contracting Out’ to the Private Sector: The Case of Water and Sanitation in Latin America.” In Melani Cammett and Lauren MacLean, eds. 2014.  The Politics of Nonstate Social Welfare Provision in the Global South.  Ithaca, NY: Cornell University Press.

In this chapter, I argue that urban water and sanitation services should be considered a fundamental part of the welfare state in developing countries. Current definitions of the welfare state are derived from the North American and European context, where the “hard infrastructure” for public health was built over a century ago. In neglecting government efforts to build and manage water and sanitation systems, the recent wave of scholarship on the welfare state in developing countries misses an important means by which states address public health concerns. Second, I argue that privatization can transform rather than enfeeble the state’s role—contrary to the expectations of many scholars, who expected low state capacity to result in minimal influence post-privatization.

"The Regulatory State Under Stress:  Economic Shocks and Regulatory Bargaining in the Argentine Electricity and Water Sectors." 2013.  In Navroz Dubash and Bronwen Morgan, eds. The Rise of the Regulatory State of the South: Infrastructure and Development in Emerging Economies.  Oxford, UK: Oxford University Press, pp. 115-134. (with María Victoria Murillo).
This chapter evaluates whether theoretical perspectives originally developed to analyze the “regulatory state” that emerged in Europe over the last thirty years have explanatory power in the developing world. While the regulatory state literature maintains that privatization and the establishment of regulatory agencies tends to depoliticize decision-making processes, we argue that politics pervades regulatory policymaking in developing countries. Focusing on Argentina, we show that regulators respond to political pressures, catering to consumer interests during competitive political periods and when serious service problems draw attention to the sectors.

"Pathways for Redistribution: Privatization, Regulation, and Incentives for Pro-Poor Investment in the Argentine Water Sector." 2009.  International Journal of Public Policy. Vol. 4, No. 1/2, pp. 51-75.

Recent studies of the effectiveness of privatisation programmes in the water and sanitation sector have highlighted the diversity of experiences, especially with respect to the distributional consequences of reforms. This study of water and sanitation privatisation programmes in the city and province of Buenos Aires suggests that the main institutional change achieved by privatisation – the insertion of an agent with a profit motive – can yield pressures for more progressive pricing and expansion policies. Firms, after all, have a strong interest in collecting revenues as efficiently as possible and in avoiding negative publicity, which can lead them to push for policies that shift the burden of payment away from the poor. The potentially progressive effects of these policies, however, are likely to be weakened if host governments or firms shorten their time horizons. Politicians concerned with their short-term political survival can block the implementation of revenue-enhancing policies and measures designed to shift the burden of system financing from the poor to the middle class or business. Firms, on the other hand, invest at lower rates once they lose their long-term commitment to the market.

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