Budgetary interests and the degree of unbundling in electricity markets: An empirical analysis for OECD countries

The degree of liberalization in OECD electricity markets varies considerably across countries. Commonly explained by diverging economic performances, corruption levels or government ideologies, this paper suggest another potential reason for cross-national differences in market reforms: given the high financial dependence of regulatory actors on public funding both in the past and nowadays, we expect regulators to increasingly refrain from [foster] the implementation of liberalization steps, the more such measures reduce [raise] the revenues of a tax; this prevents [aims at realizing] substantial decreases [increases] in public revenues (being a major source of regulatory funds) and thus most likely also in the regulators' budgets. Estimation results substantiate these considerations for both the corporate income tax and (in cases of a high price elasticity of power demand) the VAT on electricity.