The institutional environment for telecommunications investment

This paper demonstrates that a structurally derived, internationally compar able index of checks and balances on executive discretion created by variat ion in political structures and party systems affects relative rates of bas ic telecommunications infrastructure deployment in 147 countries during the period 1960-1994. Models of infrastructure investment that omit the politi cal characteristics of a prospective host country confound countries whose economic and demographic characteristics point to rapid demand growth for i nfrastructure services with those that create a potential trap for investor s due to a higher probability of arbitrary change in the policy environment . The econometric analysis exploits both cross-sectional and temporal varia tion in the panel. A robust covariance-matrix estimator based on that devel oped by Newey and West is used to compute valid standard errors in the pres ence of heteroskedasticity and within unit-serial correlation, two common c haracteristics in the error-term structure of panel datasets.