Regulation and efficiency incentives: evidence from the England and Wales water and sewerage industry

This paper evaluates the impact of the tightening in price cap by OFWAT and of other operational factors on the efficiency of water and sewerage companies in England and Wales using a mixture of data envelopment analysis and stochastic frontier analysis. Previous empirical results suggest that the regulatory system introduced at privatization was lax. The 1999 price review signaled a tightening in regulation which is shown to have led to a significant reduction in technical inefficiency. The new economic environment set by price-cap regulation acted to bring inputs closer to their cost-minimizing levels from both a technical and allocative perspective

Drivers of regional efficiency differentials in Italy: technical inefficiency or allocative distortions?

This paper estimates regional economic efficiency differentials at the firm level in the Italian manufacturing sector over the period 1998-2003. We implement an input distance function approach providing measures of both technical inefficiency and allocative distortions in the choice of input mixes. Our results confirm the substantial technical efficiency gap suffered by firms located in Southern regions, thus providing empirical support to the “structural and technological gap” interpretation of the Italian dualism. On the other hand, allocative distortions in the use of inputs show less remarkable regional differences. As for policy implications, our results suggest the need for a re-allocation of public resources for development policies from business incentives measures towards public investments.Technical and allocative efficiency, Input distance function, Development policies

The Costs of Disposal and Recycling. An Application to Italian Municipal Solid Waste Services

The paper investigates the costs of waste disposal and recycling services by using a well-behaved Composite cost function model. Our estimates on a unique sample of more than 500 Italian municipalities highlight that the refuse collection technology exhibits constant returns to scale as well as scope economies between disposal and recycling. As far as the size of the municipality increases, scope economies rise up to 14%, but they are accompanied with overall diseconomies of scale. Our findings suggest that, on the one hand, joint management of disposal and recycling should be encouraged, and, on the other hand, that strategies aimed at increasing the share of waste sent for recycling would not imply a considerable increase in total costs.solid waste, recycling, cost functions

The determinants of board compensation in SOEs. An application to Italian local public utilities

This paper investigates the determinants of board compensation for a sample of Italian State Owned Enterprises (SOEs). To that purpose, we use a newly collected panel data of 106 local public utilities observed form 1994 through 2004, which includes detailed information on the boards of directors. During this period, the deregulation process inspired institutional interventions that forced utilities, traditionally owned by local municipalities, to change their juridical form and ownership structure, thereby facilitating the entrance of private investors. The corporate governance literature shows that such changes may exacerbate the agency conflicts between shareholders, top executives and the board. However, board compensation could reduce the agency costs by aligning the incentives of managers with the interests of shareholders. This paper addresses this issue by investigating the impact that board composition, firm characteristics and performance have on board compensation. We find that the average board pay is negatively related to board size and positively related to firm dimension. The public or private nature of the major shareholder does not influence board compensation but the juridical form does. Finally, while the proportion of politically connected directors is found to negatively influence the level of per capita compensation, the impact of firm performance is uncertain.board compensation, board composition, politicians, local public utilities

The Costs of Disposal and Recycling. An Application to Italian Municipal Solid Waste Services

The paper investigates the costs of waste disposal and recycling services by using a well-behaved Composite cost function model. Our estimates on a unique sample of more than 500 Italian municipalities highlight that the refuse collection technology exhibits constant returns to scale as well as scope economies between disposal and recycling. As far as the size of the municipality increases, scope economies rise up to 14%, but they are accompanied with overall diseconomies of scale. Our findings suggest that, on the one hand, joint management of disposal and recycling should be encouraged, and, on the other hand, that strategies aimed at increasing the share of waste sent for recycling would not imply a considerable increase in total costs.Solid waste, recycling, cost functions

LO STATO DI SALUTE DEL SISTEMA INDUSTRIALE PIEMONTESE: ANALISI ECONOMICO-FINANZIARIA DELLE IMPRESE PIEMONTESI SECONDO RAPPORTO 1998-2001

Pubblicazione promossa dalla Regione Piemonte, Direzione Industria, Settore Osservatorio Settori Produttivi Industriali .

Managerial aspects and efficiency analysis in the gas distribution industry

The gas distribution in Italy is nowadays subjected to a deep process of deregulation, aimed to strengthen the competitive rules. In the same time, this industry is undergoing intensive regulation constraints, particularly in the definition of service prices. The mentioned deregulation process is considered to impact positively both on profitability and productivity growth. The present study is aimed to verify how cost saving can be regarded as one of the most important competitive advantage.This analysis is conducted on a sample of 33 firms, observed through the period 1994-1999. Categorical variables such as type of ownership, operational size and diversification of activities are also taken into accountGas utilities, Costs, Productivity growth

The determinants of board compensation in SOEs: An application to Italian public utilities

This paper investigates the determinants of board compensation for a sample of Italian State Owned Enterprises (SOEs). To that purpose, we use a newly collected panel data of 106 local public utilities observed for the years 1994-2004, which includes detailed information on the boards of directors. During this period, the deregulation process inspired institutional interventions that forced utilities, traditionally owned by local municipalities, to change their juridical form and ownership structure, thereby facilitating the entrance of private investors. The corporate governance literature shows that such changes may exacerbate the agency conflicts between shareholders, top executives and the board. However, board compensation could reduce the agency costs by aligning the incentives of managers with the interests of shareholders. This paper addresses this issue by investigating the impact that board composition, firm characteristics and performance have on board compensation. We find that the average board pay is negatively related to board size and positively related to firm dimension. The public or private nature of the major shareholder does not influence board compensation but the juridical form does. Finally, while the proportion of politically connected directors is found to negatively influence the level of per capita compensation, the impact of firm performance is uncertain.board compensation, board composition, politicians, local public utilities

Regulatory and Environmental Effects on Public Transit Efficiency. A Mixed DEA-SFA Approach

The aim of this paper is to account for the impact of statistical noise and exogenous regulatory and environmental factors on the efficiency of public transit systems in a DEA-based framework. To this end, we implement a three-stage DEA-SFA mixed approach based on Fried et al. (2002) using a 1993-1999 panel of 42 Italian public transit companies. This allows us to decompose input-specific DEA inefficiency measures into three components: exogenous effects, pure managerial inefficiency, and statistical noise. First, the initial evaluation of producer performance is carried out using conventional variable returns to scale DEA (Banker et al., 1984). Second, a SFA approach (Battese and Coelli, 1992) is used to regress single input slacks on subsidies regulation (cost-plus versus fixed-price contracts) and a set of environmental variables including network speed and user density. Finally, third stage re-runs DEA on inputs purged of both exogenous effects and statistical noise. Results are such that adjusting for the type of regulatory scheme, environmental conditions, and statistical noise increases average efficiency in the industry and reduces dispersion among firms. Furthermore, the implementation of fixed-price subsidies is found to enhance efficiency in the usage of “drivers” and “materials and services” inputs. Such a result sheds some light on the determinants of input-specific efficiency differentials in the industry, improving the existing evidence on mean overall cost efficiency (e.g. Gagnepain e Ivaldi, 2002; Piacenza, 2006). As a policy implication, it is confirmed the relevance of regula tion aimed at replacing cost-plus subsidization mechanisms with high-powered incentive contracts as well as improving operating conditions of public transport networks.Public transit systems, Regulation, Environmental effects, Statistical noise, Data Envelopment Analysis (DEA), Stochastic Frontier Analysis (SFA)

OSSERVATORIO SULLA DINAMICA ECONOMICO-FINANZIARIA DELLE IMPRESE DELLA FILIERA DELL’AUTO IN PIEMONTE.SECONDO RAPPORTO 1999-2002

Pubblicazione promossa dalla Regione Piemonte, Direzione Industria, Settore Osservatorio Settori Produttivi Industriali e redatta dal Ceris-Cnr.