Do infrastructure reforms reduce the effect of corruption? Theory and evidence from Latin America and the Caribbean

This paper investigates the interaction between corruption and infrastructure policy reforms.  I construct a simple model to illustrate how both an incerase in regulatory autonomy and privatisation may influence the effect of corruption.  This interaction is then analysed empirically using a panel of 153 electricity distribution firms across 18 countries in Latin America and the Caribbean between 1995 and 2007.  I find evidence that greater corruption is associated with lower firm efficiency, but that this association is reduced when an independent regulatory agency is present.  These results survive a range of robustness checks including instrumenting for regulatory governance and corruption.  I also find slightly less robust evidence that private ownership further mitigates the association between corruption and efficiency.