Commitment and Regulatory Independence in Practice in Latin American and Caribbean Countries

We present an analysis of the evolution of regulatory independence in practice for 23 Latin American and Caribbean countries in the telecommunications industry. Based on this analysis, we construct indices of regulatory independence, which improve upon the measures that have been used so far in the empirical regulation literature. Our measures are consistent with the fact that legal independence does not solve, but it relocates, the commitment problem of utility regulation. We show that legal indices may give a partially distorted picture of the commitment ability of institutions. In addition, treating independence as exogenous may underestimate its impact. The combination of de facto and de jure independence has a positive (probably modest nonetheless) impact on network penetration in telecommunications markets.