Table 4: Percentage of Developing Countries in 2015 with ineffective combinations of reform steps

|**Combination of Reform steps**|**%**|
|---|---|
|**% of all countries that have unbundled without experiencing private sector participation**|4|
|**% of countries that have experienced private sector participation without unbundling**|34|
|**% that have created an independent regulator without private sector participation**|12|
|**% that have allowed competition without private sector participation**|1|
|**% that have allowed competition without an independent regulator**|12|

_Source_ : WB 2017a.

A separate issue in the analysis of the impacts of reform policies is that of degree. Many of the earlier econometric studies characterized reform steps as being either “on” or “off”, implying that the benefits achievable were of a fixed size, and did not depend on the “degree” to which the reform step was implemented. Some more recent studies have noted that each of the reform steps can be characterized as being implemented to a greater or lesser extent, and hence suggest that the largest impacts on sector performance would be attained when each of the reform steps is fully implemented. This refinement is important in econometric modeling of the impacts of reform policies and is also important for the construction of an overall “reform index” used to indicate how far a country has gone towards the full implementation of this reform strategy.

- _The degree of unbundling_ . Most studies have treated unbundling as a two-valued state, defined by whether generation is separated from transmission, thus facilitating entry (Nakayama, 2007; Erdogdu, 2011). Vagliasindi (2012) termed separating generation from transmission as “partial vertical unbundling” and added a second criterion of “full vertical unbundling” when transmission was separated from both generation and distribution. Besant-Jones (2006) described degrees of unbundling, but this has not been reflected in the econometric studies evaluating the various policy options, apart from Vagliasindi (2012).

- _The degree of privatization_ . Earlier studies also treated privatization as two-valued. A privatized sector was one where there was some private sector participation, and nonprivatized indicated entirely state-owned (Nakayama, 2007; Zhang et al., 2005; Erdogdu, 2014b). A variation on this approach defined privatization having occurred when there was at least 50% private ownership in any subsector (Balza et al., 2013). These measures of privatization imply the same gains in performance would accrue to privatization however much greater private ownership was than the threshold value (zero or 50% in the two cases). Nakayama (2007) defined privatization assets by two “on/off” variables: the introduction of independent power producers (IPP), and the privatization of existing utility assets, but did not model further increases in performance as impacted by increasing shares of private capital.

Gassner et al. (2009) identified four forms of private sector participation:

- _Full divestiture._ Transfer of 100% of assets to private hands for an indefinite period

- _Partial divestiture._ Transfer of 51% (but less than 100%) of assets to private hands for an indefinite period

- _Concession._ Transfer of assets and rights for a limited period

14