1. Succeeding in the US car market as German car manufacturer 2009/06/121 Aleksandra Peeroo NGI Stock Taking Workshop 2009 Regulatory Design in the Water Sector: Technological or Institutional Constraint? Aleksandra Peeroo University of Paris – Centre d’Economie de la Sorbonne Maison des Sciences Economiques 106-112, bd de l’Hôpital 75013 Paris Aleksandra.Peeroo@gmail.com

2. Succeeding in the US car market as German car manufacturer 2009/06/122 Aleksandra Peeroo NGI Stock Taking Workshop 2009 Structure of presentation Introduction: Aim and motivation Section 1: The ABC of regulatory design Section 2: Theoretical framework: technological and institutional perspectives Section 3: Application: propositions and empirics Section 4: Results and discussion Regulatory Design in the Water Sector: Technological or Institutional Constraint?

3. Succeeding in the US car market as German car manufacturer 2009/06/123 Aleksandra Peeroo NGI Stock Taking Workshop 2009 Aim and motivation Aim: provide an answer to the question, what constrains regulatory design Motivation: Literature on role of institutions and technology on regulatory performance (Shirley 2002; Nelson, Sampat 2001) But little on regulatory design: mostly LDC, regulatory agency, none water sector Important for regulatory reform in times of liberalization Regulatory Design in the Water Sector: Technological or Institutional Constraint?

4. Succeeding in the US car market as German car manufacturer 2009/06/124 Aleksandra Peeroo NGI Stock Taking Workshop 2009 1. The ABC of regulatory design What is it? (Joskow, 1998; Guasch, Spiller, 1999; Estache, Martimort, 1999) Basic regulatory instruments: specific legislation, decrees, contracts, administrative procedures Regulatory agency Levels of distribution of regulatory power Single- vs multi-sector regulation (Not here: regulatory mechanisms design: fixed price vs cost plus) Regulatory Design in the Water Sector: Technological or Institutional Constraint?

5. Succeeding in the US car market as German car manufacturer 2009/06/125 Aleksandra Peeroo NGI Stock Taking Workshop 2009 2. Technological vs institutional perspectives Technological view: characteristics of WS AS: sunk costs, eco of scale / density  very “natural” monopoly Uncertainty: underground assets Frequency: very long lifecycle of assets Local utility No major technological change Regulatory Design in the Water Sector: Technological or Institutional Constraint?

6. Succeeding in the US car market as German car manufacturer 2009/06/126 Aleksandra Peeroo NGI Stock Taking Workshop 2009 2. Technological vs institutional perspectives Impact on RD Natural monopoly  multi-sector regulator (Joskow 1998) AS  risk of gvt opportunism  credibility needed (Savedoff, Spiller 1999) Technological change  adaptation needed (change of market conditions (Bickenbach 2000)), single-sector (Joskow 1998) Critical technical functions  need support (F/G/K 2005; K/G/M 2009) Regulatory Design in the Water Sector: Technological or Institutional Constraint?

7. Succeeding in the US car market as German car manufacturer 2009/06/127 Aleksandra Peeroo NGI Stock Taking Workshop 2009 2. Technological vs institutional perspectives Institutional view: points of analysis Political system: unitary vs divided gvt (McNollgast 1987, 1989; Levy, Spiller 1994; Spiller, Tommasi 2005) Degree of centralization: federal vs central state (Weingast 1995) Checks & balances: judiciary (Spiller), arbitration Supranational institutions: shift of competence from national to higher level (Bickenbach 2000) (Not here: informal norms, social interests, administrative capabilities (North 1990)) Regulatory Design in the Water Sector: Technological or Institutional Constraint?

8. Succeeding in the US car market as German car manufacturer 2009/06/128 Aleksandra Peeroo NGI Stock Taking Workshop 2009 2. Technological vs institutional perspectives Institutional view: impact on RD Unitary vs divided gvt  be aware of influence on credibility! Federal vs central state  distribution of regulatory power (level) Judiciary, arbitration  provides regulatory credibility Supranational institutions  change in regulatory design Regulatory Design in the Water Sector: Technological or Institutional Constraint?

9. Succeeding in the US car market as German car manufacturer 2009/06/129 Aleksandra Peeroo NGI Stock Taking Workshop 2009 3. Propositions and empirics Propositions technological view General idea: convergence of regulatory design Natural monopoly and absence of technological change  multi-sector regulator or at least no single-sector regulator AS  risk of gvt opportunism  credibility needed  solution: separation of regulatory powers (e.g. quality, tariffs, environment) Uncertainty  transparency obligations (reports) Frequency  rigid regulatory design Local utility  regulatory institutions on local level; benchmark competition Regulatory Design in the Water Sector: Technological or Institutional Constraint?

10. Succeeding in the US car market as German car manufacturer 2009/06/1210 Aleksandra Peeroo NGI Stock Taking Workshop 2009 3. Propositions and empirics Propositions institutional view General idea: divergence of regulatory design Unitary vs divided gvt  rigidity and safeguards vs flexibility and less safeguards Federal vs central state  decentralization and variety vs centralization and homogeneity Judiciary, arbitration  when strong  more flexible regulatory design Regulatory Design in the Water Sector: Technological or Institutional Constraint?

11. Succeeding in the US car market as German car manufacturer 2009/06/1211 Aleksandra Peeroo NGI Stock Taking Workshop 2009 3. Propositions and empirics Empirics Use of case studies France, England & Wales, Germany, the Netherlands Presentation of institutional endowment Analysis of regulatory design Regulatory Design in the Water Sector: Technological or Institutional Constraint?

12. Succeeding in the US car market as German car manufacturer 2009/06/1212 Aleksandra Peeroo NGI Stock Taking Workshop 2009 4. Results and discussion Technological view AS  need for separation of regulatory powers  yes, e.g. E&W: separation of environmental, economic, and quality regulation Locality  no, not always local regulation! Multi-sector regulation  no, regulatory agencies rare Institutional view Political system  yes, e.g. E&W: rigid regulation (licenses) because of unitary gvt Level of regulation according to degree of centralization  yes, e.g. Germany, France Technology matters but institutions prime! Regulatory Design in the Water Sector: Technological or Institutional Constraint?

13. Succeeding in the US car market as German car manufacturer 2009/06/1213 Aleksandra Peeroo NGI Stock Taking Workshop 2009 Thanks for your attention! Regulatory Design in the Water Sector: Technological or Institutional Constraint?