The Literature on Regulation: A Critical Assessment

Thus far, the academic literature has developed an enriching array of studies on regulatory reform. Starting with developments in the United States, Japan and Great Britain in the early and mid 1980s, reform programmes in the telecommunications and electricity sector have sparked a trend in the social science literature to study this topic more closely. In the 1980s the discussion began with a focus on privatization policies in the context of the upcoming era of globalization for which the initiatives of the Thatcher

government in the United Kingdom served as a primary example (cf. Vickers and Yarrow 1988). By the time European legislation had begun to demand national liberalization initiatives from the member countries in order to create a Single European Market (SEM), the literature commenced to deal with issues of market opening and competition (cf. Doern and Wilks 1996). Finally, towards the late 1990s the focus shifted once again. This time, the discussion centred around aspects of regulatory governance, i.e. new instruments and institutions with which competition in newly liberalized sectors could be safeguarded (cf.

Jordana and Levi-Faur 2004b).

However, although regulatory reform has been widely discussed over the last two decades, research in this field is far from being complete. Studies often focus on single country, single sector or cross-country analyses, thus limiting the analytical scope for the identification of the factors behind regulatory reform. By reducing the scope to selected countries or sectors, it becomes difficult to assess the influence of certain exogenous factors in the reform process, i.e. the diffusion of policies or ideas. What is more, existing studies are in most cases limited to developments in countries of the Western hemisphere;

the new EU member states have for a long period almost completely been neglected in academic research on this topic. It was not until recently that scholars have turned their attention towards regulatory policy in the CEECs (Hare, Batt and Estrin 1999; Sturm, Müller and Dieringer 2000; Young and Wallace 2000). Nevertheless, what is still missing is a systematic comparison of regulatory reform that integrates all new EU members and applicant countries from Central and Eastern Europe.

Beyond Case Studies

Several studies make general statements about cross-national policy convergence and regulatory similarity. A closer look at the literature on regulatory reform reveals that a systematic and encompassing comparison of the reform outcomes across the old member states of the EU, and especially across the CEEC-10, is still missing. However, general conclusions are hard to derive if analyses fail to employ an adequate research design. Thus, the most frequently used analytical approach in the field of regulatory reform – case studies – is problematic for a variety of reasons. First and foremost, case studies are in

general highly selective as regards the countries and sectors under study. This, in turn, constrains the validity of general conclusions across a sample of 25 countries and several sectors. In addition, most case studies are based on theoretical frameworks that miss to integrate certain policy dimensions of regulatory reform. As a consequence, the generalizability of conclusions about cross-national regime convergence is limited.

As can be seen from Table 1.1 below, most contributions to the literature use a rather similar research design. They are either single country, single sector (Eberlein 2000;

Schmidt 1995; Werle 1999) or cross-national, single sector studies (Midttun 1997;

Schneider 2001a; Sturm and Wilks 1997; Thatcher 1999). Such an approach is obviously well-suited for an in-depth description of national reform processes and for the assessment of the factors behind cross-national differences. And undoubtedly, these study designs have contributed much to our understanding of the reform process in infrastructures.

However, for a broad assessment of regulatory reform, the methodological problem becomes evident: by focusing exclusively on the role of actors and institutions at the national level we run danger of underestimating the impact of exogenous forces (cf.

Schneider 2001b). In order to assess the role of exogenous pressures, single sector approaches have to be complemented by cross-sectoral studies. Thus far, the latter have been relatively rare. Exceptions are, for instance, contributions from Bartle (2002), Coen and Héritier (2000) or Levi-Faur (2001). They all stress the importance of cross-sectoral comparison and point to the relevance of non-institutional, exogenous factors for reform, i.e. techno-economic forces or ideas.

Table 1.1 Studies on Infrastructure Reform

Author(s) Sectors Country Focus

Telecoms Electricity Aviation Single Cross-

National EU-15 CEEC-10

Schmidt (1995) ● ●

Werle (1999) ● ●

Eberlein (2000) ● ●

Schneider (2001a) ● ●

Thatcher (1999) ● ●

Héritier and Schmidt

(2000) ● ●

Eberlein (2001) ● ●

Mez and Midttun (1997) ● ●

Sturm and Wilks (1997) ● ●

Midttun (1997) ● ●

O’Reilly and Stone Sweet

(1998) ● ●

Button (2000) ● ●

Cave (1999) ● ●

Müller (2000) ● ●

Hirschhausen and Opitz

(2001) ● ●

Sturm, Müller and

Dieringer (2001) ● ●

Bartle (2002) ● ● ●

Levi-Faur (2001) ● ● ●

Coen and Doyle (2000) ● ● ●

Coen and Héritier (2000) ● ● ●

But not only can the focus on one specific sector be problematic. It is also difficult to derive general conclusions from small country samples. One recent exception are the contributions to the volume edited by Schneider and Tenbücken (2004) which analyze infrastructure reform in 26 OECD countries and three sectors. Based on a large country-sample the authors find significant differences in the pace, timing and scope of privatization. Larger country-samples are also used by Gilardi (2002) and Levi-Faur (2003), but generally they are rather scarce. Sustainable conclusions have to rely on a solid

comparison of a sufficiently large number of countries which is embedded in an adequate analytical framework.

Problems of Existing Research Designs

First and foremost, studies on regulatory reform very often omit important analytical dimensions of regulatory reform. Many publications focus either on liberalization (Eising and Jabko 2001; Werle 1999), privatization (König and Benz 1997; Wright 1994) or reregulation (Coen and Thatcher 2001; Gilardi 2002). Thus far, there has not yet been an integrated approach which adequately considers all three of these reform policies in combination. However, cross-national regime similarity can only be assessed if suitable variables and measures are being employed. We therefore need to integrate all relevant aspects of reform: the timing and extent of privatization, the scope of market liberalization and the level of reregulation. These three dimensions are intertwined in that developments along one dimension can feedback into the other. Regulatory similarity does not only relate to the adoption of the same institutions. It is also expressed through similar levels of privatization and liberalization. Since the latter two variables are more easily quantifiable than reregulation, the comparison of reform developments across countries becomes more objective if we include them into the analysis.

A second problem regards the fact that most studies scrutinize hypotheses on an empirical basis that is too weak for broad generalizations. The literature mostly provides evidence on the basis of comparative case studies that focus on a rather small number of countries. In addition, the cases are often highly selective. Cross-national analyses among the EU-15, for instance, have focused almost exclusively on the ‘big three’, France, Germany and the United Kingdom. And also the few existing studies on regulatory reform in the CEECs have focused on the more ‘prominent’ states, such as Poland, Hungary or the Czech Republic. The Baltic states or Bulgaria and Romania have almost totally been neglected. Hence, there exists no comprehensive overview of the current level of regulatory diversity, neither among the EU-15 nor the CEEC-10, and, thus, a profound East-West comparison is also missing.

Although, significant time has elapsed since the demise of the Soviet Union and the beginning of the transition process in the CEECs, most contributions of the literature have thus far focused on questions of general political reengineering and macro-economic restructuring (cf. Herr, Tober and Westphal 1994; Hirschhausen and Bitzer 2000). A large majority of publications on regulatory reform have analyzed developments in OECD countries. In contrast, studies on infrastructure reform in the CEECs or in developing countries have been rare. There are only a few studies dealing with regulatory reform of infrastructure sectors in the new member states, i.e. the contributions by Dieringer (2001a), Hare (1999), Hirschhausen and Opitz (2001), Hruby (1999), Kubasik (1999), or Sturm, Dieringer and Müller (2001). Thus, there is need for further and systematic analysis of regulatory reform and its driving factors in the CEECs.

Third, looking at regulatory reform in infrastructures we find that certain sectors are largely understudied. This is certainly due to the fact that regulatory reform has by far been more dynamic in communications and energy than in other infrastructures, i.e. water supply, waste disposal or transportation (Henry, Matheu and Jeunemaître 2001). Among these two infrastructures the sub-sectors of telecommunications and electricity have shown the largest dynamic of change, especially in respect to sector-specific governance structures.²⁴ As a consequence, the vast majority of academic studies focuses on either one of these two sectors. Although the rail or air transport markets may so far not have experienced a comparable transformation as for instance telecommunications, the provision of transportation infrastructure belongs to a country’s core functions.

Thus, if we restrict the analysis of infrastructure reform to one or two analytical dimensions of the reform process, a handful of countries and a specific sector, the conclusions will possess only limited generalizability. Even more problematic is the tendency to extrapolate the results obtained from the comparison of a couple of cases and to derive general conclusions about the regulatory reform process in the enlarged EU.

Although the validity of the regulatory state hypothesis seems to be contested for the old

24 The communications sector can be subdivided into telecommunications, postal services and broadcasting (radio and TV), the energy sector into electricity, gas, oil and coal. Transportation, in turn, can be subdivided into road, rail and air transportation.

member states, it could well be that we can observe a relatively high level of regulatory similarity among the CEEC-10. Possibly too that in the new members the retreat of the state from infrastructure provision occurred on a larger scale than in the Western EU countries due to the existing dynamic of the post-socialist transition process.