The Impact of Privatization and Competition in the Telecommunications Sector around the World

Using a comprehensive country-level panel data set covering the period from 1990 to 2001, we investigate the impact of privatization and competition in the telecommunications sector around the world. Full privatization, which gave private owners control rights, contributed substantially to improving the allocation of labor and capital, expanding service output and network penetration, and improving labor and total factor productivities. But partial privatization, in which the state retained control rights, showed no significant impact. The increase in competitive pressure contributed substantially to growth in the sector by raising both factor inputs and total factor productivity. We also found evidence of complementarity between privatization and competition in deepening network penetration and in restraining the rise of service pricing among privatized operators. Our results are robust to plausible alternative specifications.