Political Competition and Private Participation in Infrastructure

We assembled a large panel of project-level technical and financial data, as well as country-level economic, institutional, and political variables to assess how political competition and policy insulation feasibility determine private participation in financing infrastructure in emerging markets and developing economies. Controlling for economic and institutional characteristics, we find that in parliamentary systems and in system where the rule of law is strong, an increase in political competition is associated with an increase in private participation in infrastructure through greenfield projects, concessions, and management contracts, but not in divestitures (privatizations). Our results support the hypothesis that political competition facilitates cooperation when insulation is costly or not viable