245, 246: Quotes on Fostering Innovation and Subsidies

Message no. 245 Posted by Thomas Culhane (1311520071) on Tuesday, February 6, 2007 7:17am Subject: Fostering innovation

"Poor infrastructure services can threaten health and safety, and the regulation of their quality is an important policy concern. Regulators in rich countries tend to set quality standards at high levels, reflecting a tradeoff between quality and affordability that is, more or less, appropriate in these countries. Historically, they have also relied extensively on the regulation of inputs, controlling the means by which quality standards are achieved, rather than defining acceptable outputs and allowing experimentation and innovation in ways of acheiving these outputs... focussing regulation on outputs allows providers to innovate and to offer less expensive ways of delivering service of a given quality..." (Infrastructure for Poor People: Public Policy for Private Provision, Brook and Irwin, eds. World Bank press 2003, p. 13)

Message no. 246 Posted by Thomas Culhane (1311520071) on Tuesday, February 6, 2007 7:24am Subject: Subsidies

"Before advocating a subsidy for infrastructure services, policy analysts need to compare its likely effectiveness with subsidies for other goods and services and with a subsidy provided in cash... the most effective such subsidies will probably be output rather than input based; that is they will be linked not to the use of certain inputs, such as the construction of a dam (OR POWERLINES -- T.H.) but to the achievement of certain outputs, such as the provision of electricity or water. In some circumstances subsidies may be efficiently provided through a dominant main utility, but especially when the utility doesn't serve many of the poor, a better option may be to design the subsidies so that different firms can compete to provide the subsidized services. Often governments have a choice between subsidizing consumption and subsidizing access... one scheme that allows competition and promotes access is to auction the obligation to provide services to new areas, with the winner being the firm that demands the lowest subsidy." (Brook and Irwin, 2003 pp. 14-16)