The reform of network industries, privatisation and consumers’ welfare: evidence from the EU15

In the past two decades privatisation and liberalisation of network industries providing services of general economic interest (SGEI), have been particularly significant in the European Union. Wide variations around a common policy trend can, however, be observed across countries and sectors. We focus on electricity, gas and telecoms sectors and study the welfare effects of reforms on users using both subjective data on consumers’ perception of utility prices and data on average prices paid. Our empirical findings for EU15 in the three industries we consider, are mixed. Privatisation per se consistently leads to higher consumer prices. There are, however, beneficial effects of market opening reforms, but often smaller and more uncertain than we would have expected. In terms of perceptions, consumers are happier with the price they pay under public ownership while the evidence is mixed for the other reforms. Thus, objective and subjective evidence are broadly mutually consistent, as far as privatisation is concerned. These findings are entirely new and tend to reject the earlier, more optimistic views by the European Commission on the outcomes of the reforms.