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Ownership, institutions and productivity of European electricity firms

Author

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  • Elisa BORGHI

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  • Chiara DEL BO

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  • Massimo FLORIO

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Abstract

Using firm-level balance-sheet data comparable across EU countries, we consider firms active in generation, distribution and transmission of electricity and their ownership structure to empirically investigate the interaction of public versus private ownership and the quality of institutions as determinants of productivity. While earlier literature has traditionally focused on ownership as an internal governance mechanism, and has suggested that public ownership is associated with lower productivity than under private ownership, here we focus on the role of institutions as an external governance mechanism. After controlling for size, wages, countries and sectors, we confirm that government-owned tend to be less productive than their private counterparts (a result robust to different productivity measures), but we also discover two new facts. First, when the control of the firm by government is indirect, i. e. when government ownership is at the top of the control chain, the negative productive effect is weaker. Second, this effect is smaller in countries with high-quality institutions and public enterprises are more efficient than in countries with a poor institutional environment

Suggested Citation

  • Elisa BORGHI & Chiara DEL BO & Massimo FLORIO, 2010. "Ownership, institutions and productivity of European electricity firms," Departmental Working Papers 2010-19, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  • Handle: RePEc:mil:wpdepa:2010-19
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    File URL: http://wp.demm.unimi.it/files/wp/2010/DEMM-2010_019wp.pdf
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    References listed on IDEAS

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    5. Schmidt, Klaus M, 1996. "The Costs and Benefits of Privatization: An Incomplete Contracts Approach," Journal of Law, Economics, and Organization, Oxford University Press, vol. 12(1), pages 1-24, April.
    6. Tirole, Jean, 1994. "The Internal Organization of Government," Oxford Economic Papers, Oxford University Press, vol. 46(1), pages 1-29, January.
    7. David E. M. Sappington & Joseph E. Stiglitz, 1987. "Privatization, information and incentives," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 6(4), pages 567-585.
    8. Laffont,Jean-Jacques, 2005. "Regulation and Development," Cambridge Books, Cambridge University Press, number 9780521840187.
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    10. Paul H. Malatesta & Kathryn L. DeWenter, 2001. "State-Owned and Privately Owned Firms: An Empirical Analysis of Profitability, Leverage, and Labor Intensity," American Economic Review, American Economic Association, vol. 91(1), pages 320-334, March.
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    Cited by:

    1. Massimo Florio, 2014. "Energy Reforms and Consumer Prices in the EU over twenty Years," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).
    2. Peter A. Groothuis & Tanga McDaniel Mohr, 2014. "Do Consumers Want Smart Meters? Incentives or Inertia: Evidence from North Carolina and Lessons for Policy," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 1).

    More about this item

    Keywords

    Public ownership; electricity; productivity; institutions;

    JEL classification:

    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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