Independent Regulatory Agencies and Accountability: Equity and Efficiency in the Regulation of Electricity and Telecommunication Markets

This article studies the effects of the public accountability of regulatory agencies on sector performance and economic inequalities. For many authors, accountability is a possible solution to solve the legitimacy problems of the regulatory state and to improve levels of citizen’s trust and satisfaction with otherwise rather technical regulatory decision-making. Furthermore, from the perspective of deliberative theory, public accountability may improve the quality of regulation and, thereby, sectoral performance by the attainment of diverse viewpoints and the rational deliberation of competing ideas and opinions. Specifically, higher levels of accountability are likely to shift the focus on distributional outcomes as more diverse opinions from otherwise underrepresented groups are likely to be articulated. This is likely to lead to more socially responsive regulation. However, more accountability may also have adverse effects on regulatory quality and market outcomes. From the perspective of regulatory capture theory, accountability may result in an unintended politicisation of the issues at hand and lead to the disproportional influence of vested interests rather than better decision-making. This article tests these competing claims on the effects of public accountability on sector performance by studying the effects of variations in the public accountability of about 209 electricity and telecommunications regulators on sector performance and distributional outcomes in 103 countries by the use of OLS regression. The key independent variable is an index on the accountability of regulators from the Institutional features of Regulatory Agencies data set. The dependent variables include sector performance measures such as electricity generation, distribution losses, broadband and telephone subscriptions, and sector-level prices.