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The Impact of the USO on the Profitability of Postal Service Provision in Finland


  • Koski, Heli


This study aims at investigating the order of magnitude of financial burden of the universal service obligation for the universal service provider. Prior studies have adopted various different cost accounting methods to assess the order of magnitude of net costs arising from postal universal service provision. This study, instead, uses econometric approach for predicting hypothetical profits that the universal service provider had earned without the universal service obligation, and then calculates the net losses for the firm. The econometric model takes into account the impact of cost efficiency on a firm’s profits and further the universal service provider’s entitlement to reasonable profits on postal markets. The data from the firms active in the postal and courier activities sector in Finland during the years 2005-2012 indicate that the profitability of universal service provider was clearly lower than that of competitors during the sample time period. The annual loss due to the universal service obligation was about 5 – 8 percent of the turnover of the universal service provider.

Suggested Citation

  • 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.
  • Handle: RePEc:rif:wpaper:22

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    References listed on IDEAS

    1. 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.
    2. João Amador & Ana Cristina Soares, 2012. "Competition in the Portuguese economy: Insights from a profit elasticity approach," Working Papers w201217, Banco de Portugal, Economics and Research Department.
    3. Marshall, William J & Yawitz, Jess B & Greenberg, Edward, 1981. "Optimal Regulation under Uncertainty," Journal of Finance, American Finance Association, vol. 36(4), pages 909-921, September.
    4. Jaag Christian, 2011. "What is an Unfair Burden? Compensating the Net Cost of Universal Service Provision," Review of Network Economics, De Gruyter, vol. 10(3), pages 1-32, September.
    5. Harold Creusen & Bert Minne & Henry van der Wiel, 2006. "Competition in the Netherlands; an analysis of the period 1993-2001," CPB Document 136, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Chiara Peroni & Ivete Ferreira, 2012. "Competition and Innovation in Luxembourg," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 93-117, March.
    7. J. A. Bikker & M. van Leuvensteijn, 2008. "Competition and efficiency in the Dutch life insurance industry," Applied Economics, Taylor & Francis Journals, vol. 40(16), pages 2063-2084.
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    More about this item


    universal service obligation; profitability; net cost; postal services;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L87 - Industrial Organization - - Industry Studies: Services - - - Postal and Delivery Services

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