Privatization, Corporate Control and Regulatory Reform: The case of Telefonica

This study analyzes the interaction of agency problems in public policy and of agency problems inside the firm: it investigates the case of a large privatized firm subject to many policy constraints. The last steps of Telefonica's privatization were designed to promote a disperse ownership and give managers a high level of discretion in running the company. By this, the government effectively created an agency problem inside the firm. There were no powerful shareholders to constrain the managers, and the threat of a takeover was not a credible one, since the government kept a golden share. There is no overall evidence of capture of politicians and regulators by managers in the interest of shareholders, although evidence suggests the existence of collusion between politicians and managers. We interpret the political interference with the firm’s control (a well documented phenomenon both in this study and in the cross-country literature on privatization; e.g. political ends in privatization, influence in appointments, golden shares) as the most visible part of such collusion. Liberalization and multi-level regulation will likely make any type of collusion or capture more difficult in the future.Governance, Privatization, Regulation, Deregulation, Capture

L'impacte de les eleccions de 2004 sobre les empreses del país

L'atemptat terrorista a Madrid tres dies abans de les eleccions generals de març de 2004 sembla que capgirà els resultat esperats pels sondejos decantant la balança del PP cap al PSOE. Investigadors de la UAB han aprofitat l'oportunitat única que els brinda aquest fet per analitzar l'impacte d'aquelles eleccions generals en les grans empreses espanyoles utilitzant les tècniques d'estudi d'esdeveniments, que mesuren l'impacte dels esdeveniments sorpresa en el mercat de valors, i així posar a prova algunes hipòtesis políticoeconòmiques. La seva conclusió és que l'impacte d'un o altre partit governant a Espanya no provoca grans canvis en les polítiques econòmiques generals, sinó que canvia el valor dels acords entre els polítics i les empreses.El atentado terrorista en Madrid tres días antes de las elecciones generales de marzo de 2004 parece que invirtió los resultados esperados por los sondeos decantando la balanza del PP hacia el PSOE. Investigadores de la UAB han aprovechado la oportunidad única que les brinda este hecho para analizar el impacto de aquellas elecciones generales en las grandes empresas españolas utilizando las técnicas del estudio de eventos, que miden el impacto de los eventos sorpresa en el mercado de valores, y así poner a prueba algunas hipótesis político-económicas. Su conclusión es que el impacto de uno u otro partido gobernante en España no provoca grandes cambios en las políticas económicas generales, sino cambia que el valor de los acuerdos entre los políticos y las empresas.The terrorist attack in Madrid three days before the general election of March 2004 seemed to be the cause of the unexpected election results, overturning all predictions and tipping the balance from PP to PSOE. UAB researchers have taken the opportunity this event presents to analyse the impact the 2004 election had on large Spanish firms. To do this, they used event study techniques, which measure the impact of surprise events on the stock market, and tested a series of politico- economic hypotheses. Their conclusion is that the impact produced by either of the ruling parties in Spain does not cause large changes in general economic policies. Instead, what changes is the value of agreements between politicians and firms

A federal Spain within a federal Europe would offer the best solution for Catalonia

The issue of European integration has played an important role in the debate over Catalan independence. Francesc Trillas writes that an independent Catalonia would have competing motivations in the sense that closer European integration would potentially undermine its independence, but stepping back from European integration would have a damaging effect on its ability to trade with other European states. He argues that pushing for a federal Spain within a federal Europe would offer Catalonia the best solution

Regulatory reform, development and distributive concerns

This survey reviews the relationship between regulation and distribution, focusing on regulatory reform in developing countries. The characteristics of these countries impose constraints on appropriate regulatory policies. These constraints condition: i) the terms of the trade-off between firms' rents and efficiency, including the commitment problem in the presence of sunk investments; and ii) the probability of success of removing cross-subsidies. The choices made at reforming infrastructure industries may have a significant impact on perceived distribution and development, and this impact will drive attitudes toward reform. Distributive problems are channeled through politics and institutions, conditioning the potential solutions to the commitment problem. These issues have been extensively explored by the academic literature, which provides guidance on how to address second-generation regulatory reforms.regulation; privatization; infrastructures; development; distribution;

The Spanish government should offer Catalonia a referendum on federalism, not independence

Catalonia held a non-binding consultation on independence on 9 November. Francesc Trillas assesses the argument that the Spanish government should now seek to address the Catalan independence debate by proposing a formal referendum on the issue. He argues that while there are benefits to holding a referendum, there are also a number of costs in the Catalan case, and that offering a binding vote on federalism would be a far better option for Catalonia, Spain and Europe as a whole

Lobbies, Delegation and the Under-investment Problem in Regulation

A time-inconsistency problem in regulation often results in under-investment es- pecially where there are high sunk costs in network industries such as electricity, gas, telecommunications and water. This paper provides a new perspective on this ‘hold-up’ problem facing the price regulation of a firm with market power where full commitment to a price regime is not possible. We compare a political equilibrium based on a voting model with lobbying with a delegation equilibrium, where a gov- ernment can delegate to a particular ‘type’ of pro- or anti-industry regulator. Our analysis suggests two possible ways in which we may observe price regulation that en- courages socially optimal investment in the absence of externally imposed regulatory commitment: first, there is less than total transparency in which voters receive an optimal amount of information and second, the decisions on price are delegated to a sufficiently, but not excessively, pro-industry regulator.under-investment, political equilibrium, capture, delegation.

The objective of social democracy should be ‘sustainable progress’

What should the aim of Europe’s social democrats be? Francesc Trillas writes that the Eurozone crisis presents something of a paradox in the sense that social democratic parties in several European countries have struggled electorally, despite the crisis being closely associated with failures in the banking industry. He argues that the aim of social democrats should be reframed around promoting ‘sustainable progress’, with a wider strategy to tackle unemployment in a globalised context

International organisations must take the lead on reducing income inequality

Is income inequality always bad for society? Francesc Trillas writes on the impact of inequality on democracy. Taking issue with the perspectives of economists such as Gregory Mankiw, he argues that a growing income gap between the wealthy and the rest of society can pose a fundamental challenge for a country’s political system. He notes that the effects of globalisation, combined with the flawed incentives contained within national politics, have reduced the ability of nation states to tackle inequality. As a result only the development of new international institutions can solve the problem