Understanding the energy sector deregulations: international evidence

We extend the political economy analysis of reforms proposed by Abiad and Mody (Am Econ Rev 95(1):66-88, 2005) to the energy sector, then the 'crises' and 'learning' hypotheses are modified, and the roles of economic openness and capital markets are emphasised. Given the hypotheses, a conceptual framework of energy deregulations is proposed. Furthermore, we employ 46 countries panel dataset to conduct the empirical analysis. We find that energy sector deregulations are a dynamic learning process; specifically, the U-shaped nexus between the previous experience of deregulations and the current change of deregulations is confirmed. The systemic banking crises and the sovereign debt crises are the drivers of deregulations in the electricity sector and gas sector, respectively, while the currency crises, economic recession, and inflation reverse it. For political variables, we find the parliamentary government significantly matters with the reforms, while other variables will drag the deregulations or shape the deregulations insignificantly. The economic openness and capital market development are identified as the prominent-driven factors of energy reforms. The baseline results are stable through a series of robustness checks.