Studies of the performance effects of public vs private ownership have found mixed evidence. This paper draws on theory suggesting that public enterprise may have an advantage in producing goods and services whose quality attributes are difficult to specify a priori. Using a comprehensive data set of U.S. electric utilities to estimate cost functions, we find that while privately owned systems achieve lower costs in generation, public systems generally have an advantage in the end-user-oriented distribution function with its more non-contractible quality attributes. Other evidence on quality differences by ownership type and by enterprise size supports this distinction.
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Find related papers by JEL classification: L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
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