ABSTRACT
In severely unequal developing countries there are large numbers of poor, a small number of rich, and few in-between. This simple description, sadly, portrays much of Latin America. What is more difficult to describe is why policy makers have failed to do anything about it. Political economy theories of elections and policy making suggest that rational politicians in democratic systems should enact policies that appeal to the median voter. Given the skewed distribution of wealth in Latin America, the median voter is located closer to the vast majority of poor voters, i.e. policies targeted at the median voter should be pro-poor. Yet, in Latin America one can find some of the most regressive policies in the world (Weyland, 1996). This is especially the case when one examines reform of utilities sectors. Under state ownership, they were inefficient and often failed to reach the poor, and after privatisation, universal service provision remains elusive. What explains the regressive policy bias in public sector utilities, and more generally, and what can be done about it?
