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Should Publicly Funded Postal Services be Reduced? A Cost-Benefit Analysis of the Universal Service Obligation in Norway

Author

Listed:
  • Lindhjem Henrik

    (Vista Analysis & Norwegian Institute for Nature Research)

  • Pedersen Simen

    (Vista Analysis)

Abstract

We conduct, to our knowledge, the first cost-benefit analysis of the universal service obligation (USO) in the postal sector. Three alternatives are analysed that reduce delivery frequency and/or delivery speed, with particular emphasis on quantifying the potential loss of consumer benefits. Social cost savings are analysed for the service provider, for the environment and for the government through lower levels of distortionary taxes. Although there are challenges involved in measuring the net welfare change, especially loss in consumer benefits, our results suggest that only the largest reduction in the USO may be justified on social efficiency grounds.

Suggested Citation

  • Lindhjem Henrik & Pedersen Simen, 2012. "Should Publicly Funded Postal Services be Reduced? A Cost-Benefit Analysis of the Universal Service Obligation in Norway," Review of Network Economics, De Gruyter, vol. 11(2), pages 1-33, June.
  • Handle: RePEc:bpj:rneart:v:11:y:2012:i:2:n:3
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    References listed on IDEAS

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    Cited by:

    1. Koski, Heli, 2013. "The Impact of the USO on the Profitability of Postal Service Provision in Finland," ETLA Working Papers 22, The Research Institute of the Finnish Economy.

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