Cost Inefficiency in the English and Welsh Water Industry: An Heteroskedastic Stochastic Cost Frontier Approach.

In this study we analyze the evolution of operating cost inefficiency for the English and Welsh water industry over the period 1995-2001 by estimating an heteroskedastic stochastic variable cost frontier. The main aim of this paper is to provide an overall picture of the industry cost inefficiency, as we consider both the water and sewerage companies and the smaller water only companies. The main results of this paper are that industry operating cost inefficiency has decreased over the sample period and that inefficiency differentials among firms have steadily narrowed. This pattern of inefficiency might have been generated by the incentives provided by comparative and capital market competition which became fully operative after the 1994 price review.

An Assessment on the Cost Structure of the UK Airport Industry: Ownership Outcomes and Long Run Cost Economies

In this paper we analyze the cost structure of the UK airport industry by estimating a variable cost function for the period 1994-2005. Overall results suggest that the long run average costs curve is U-shaped: it decreases until passenger traffic reaches approximately five millions, it remains flat over the range between five and fourteen million passengers and afterwards it starts to increase. Moreover, our findings provide evidence consistent with the existence of some degree of overcapitalization for the largest regulated airports. Finally, we analyze whether different forms of ownership entail cost differentials across airports and we find that privately owned airports are characterized by lower costs with respect to public and mixed ones, although cost differentials shrank over time as public and mixed airports improved their rate of cost reduction. Main results are robust to unobserved heterogeneity at the airport or market level and to possible endogeneity biases. Possible regulatory and policy implications of these results are also discussed.scale economies, public ownership, airports

Cost Inefficiency in the English and Welsh Water Industry: An Heteroskedastic Stochastic Cost Frontier Approach.

In this study we analyze the evolution of operating cost inefficiency for the English and Welsh water industry over the period 1995-2001 by estimating an heteroskedastic stochastic variable cost frontier. The main aim of this paper is to provide an overall picture of the industry cost inefficiency, as we consider both the water and sewerage companies and the smaller water only companies. The main results of this paper are that industry operating cost inefficiency has decreased over the sample period and that inefficiency differentials among firms have steadily narrowed. This pattern of inefficiency might have been generated by the incentives provided by comparative and capital market competition which became fully operative after the 1994 price review

Market power, productivity and the EU single market program: An ex-post assessment on Italian firm level data

This paper provides empirical evidence on the impact the EU Single Market Program has exerted on market power and total factor productivity in a large sample of Italian firms. By splitting the full sample on the basis of the ex-ante likelihood of being affected by the removal of non-tariff barriers within EU boundaries, we are able to control for other economic shocks, provided they affect all firms randomly. Both market power and total factor productivity are estimated by applying several extensions of the methodology developed by Hall. Main findings can be summarised as follows. Firstly, for the sample of "most sensitive" firms market power decreases by 50% in the SMP implementation period compared to previous years, whereas no clear pattern emerges for the other sub-samples of firms. Secondly, only for the sub-sample of "most sensitive" firms a positive transitory shock to productivity growth rates is observed immediately after the announcement of the reform project. Overall, these results are consistent with the long standing view that economic integration reduces firms' market power and increases productivity via the removal of non-tariff barriers

The Appropriateness of the Poolability Assumption for Multiproduct Technologies: Evidence from the English Water and Sewerage Utilities

The empirical literature on the cost structure of multiproduct firms (e.g., public utilities providing in combination gas, water, and electricity) traditionally assumes a common technology across different products and stages of production, letting the issue of poolability unexplored. The appropriateness of this assumption is tested here by estimating a General cost function for samples of UK specialized and sewerage-diversified water utilities. The results show the existence of both aggregate scale economies and diseconomies of scope; more interestingly, the hypothesis that the two groups of water companies share the same technological parameters is rejected. Given the implications of this finding in terms of optimal industry configuration and possible restructuring policies (e.g., mergers and/or divestitures), our test suggests caution in pooling samples when undertaking empirical studies on data which refer to multiproduct technologies.Multiproduct technologies; Water and sewerage utilities; Poolability; General cost function

Price Matching in Online Retail

We analyze a sample of consumer-electronics products sold by the US NewEgg online-retailer to study the impact of Price Matching Guarantees (PMGs) policies on prices. By applying a Difference-in-Differences approach, we find that prices of the policy-adopting retailer increase by 4.7% during the policy validity period and up to five days after the treatment, while those of the major non-adopting competitor are not affected. Results are mainly driven by highly- rated, visible and expensive products, while the policy does not affect low-rated, less visible and cheaper ones. Overall findings are consistent with the hypothesis that PMGs act as price discrimination tools

Alcune riflessioni sulla pratica regolatoria, con riferimento ad alcuni settori dell’industria dei trasporti

La regolazione dei mercati rappresenta un elemento fondamentale per il raggiungimento di un’organizzazione più efficiente del sistema dei trasporti insieme ad una distribuzione equa dei vantaggi derivanti dallo stesso. In tale ottica la tutela del consumatore, le norme legate alla qualità e alla sicurezza dei beni e servizi scambiati su un mercato e una consona valutazione delle esternalità sono solo alcuni degli elementi di criticità di cui il regolatore dovrebbe tenere conto. In molti paesi, a partire dagli anni ’80, il settore dei trasporti è stato coinvolto dal processo di privatizzazioni e liberalizzazioni che ha interessato molte public utilities e che ha portato, in particolare, alla creazione di mercati regolati in cui le infrastrutture sono tipicamente gestite in concessione, mentre i servizi, laddove non sia possibile l’introduzione di forme di concorrenza, vengono invece regolamentati e le tariffe determinate secondo regole pre-definite. Nel corso del tempo alcune forme di regolazione tariffaria sembrano essersi imposte senza che la loro adozione nel caso di un particolare settore sia stata adeguatamente valutata alla luce delle caratteristiche economico-tecnologiche del settore stesso. Lo studio qui proposto si prefigge di effettuare un confronto tra i due principali metodi di regolamentazione tariffaria (price cap e regolazione del tasso di rendimento, RoR) tipicamente applicati nei settori altamente regolati, in cui la concorrenza è limitata per motivi tecnici o legati alla sicurezza. L’articolo è organizzato come segue. Il primo paragrafo è dedicato ad una breve discussione della letteratura, mentre nel secondo paragrafo vengono analizzate criticamente le principali caratteristiche dei metodi di regolazione tariffaria ispirati al price cap e al RoR. Quindi, nel terzo paragrafo viene analizzato, alla luce della discussione teorica sviluppata precedentemente, il caso di due diversi settori dei trasporti (autostrade e ormeggio) regolati in Italia con metodi di tipo price cap e RoR. Infine,il quarto paragrafo è dedicato alle conclusioni e alla discussione di possibili sviluppi futuri della ricerca

Roads to Innovation: Evidence from Italy

In this study, we leverage on the ancient Roman roads network as a source of exogenous variation to identify the causal effect of the modern highways network on innovative performance of Italian NUTS\u20103 regions. Empirical findings suggest that a 10% increase in the highways stock in a region generates an increase in the number of patents of about 3%\u20134%, over a 5\u2010year period. Further analysis suggests that our findings can in part be explained by a reduction in travel costs that fosters collaborations among inventors living in different regions and by an increase in the degree of centrality in the regional innovation network associated to denser highways networks. Finally, we find that the innovation\u2010enhancing effect of highways declines over time, possibly because of the introduction of information and communication technology, or the increasing congestion on the Italian network

High-Speed Railways and Firms Total Factor Productivity: Evidence from a Quasi-Natural Experiment

The focus of this study is to assess the causal impact of the connection of a local area to a high-speed rail network (HSR) on firms' total factor productivity (TFP). The quasi-random location of the HSR station in the Italian city of Reggio Emilia is exploited in a Difference-in Differences (DiD) research design applied to a large sample of firms, observed over the period 2010-2018. The results suggest that the opening of the HSR station improved treated firms' TFP of about 5%; in particular, such effect is larger for firms closer to the HSR station and slightly increases over the sample period. We also find that the impact of the connection to the HSR station is heterogeneous across industries and depends on firms' size and past productivity. Overall results are robust to a large number of sensitivity checks and falsification tests