Technology and Incentive Regulation in the Italian Motorway Industry

Posted: 28 Oct 2008

See all articles by Luigi Benfratello

Luigi Benfratello

University of Turin - Department of Economics and Financial Sciences G. Prato; CERIS-CNR

Alberto Iozzi

Universita degli Studi di Roma

Paola Valbonesi

University of Padua - Department of Economics and Management, DSEA

Date Written: October 25, 2008

Abstract

Making use of an original data set containing information on 20 Italian motorways concessionaires over the 1992-2004 period, we study the technology prevailing in the motorways industry in Italy. We focus on the estimation of the technical progress for the years covered by our sample, and on the measurement of the economies of scale and density. We find that the industry has experienced significant technical progress and that there are sizable economies of density and scale (at least up to a medium-large network size). These results provide valuable insights for regulatory purposes, notably for the definition of the optimal dimension of the network of a concessionaire and the correct setting of the X factor in the price cap formula, which is used to regulate the toll levels. We also control for the effects on the performance of the concessionaires due to the changes in the ownership structure and the regulatory regime, both introduced by the recent reform of the industry. We find that the productivity of the concessionaires has not increased with the adoption of a price cap regime, while it has benefited from the privatization process.

Keywords: Incentive regulation, technology, motorways industry

Suggested Citation

Benfratello, Luigi and Iozzi, Alberto and Valbonesi, Paola, Technology and Incentive Regulation in the Italian Motorway Industry (October 25, 2008). Journal of Regulatory Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1289564

Luigi Benfratello

University of Turin - Department of Economics and Financial Sciences G. Prato ( email )

C. so Unione Sovietica, 218 Bis
Torino, 13820-4020
Italy
+39 011 6706072 (Phone)
+39 011 6706062 (Fax)

CERIS-CNR ( email )

Italy

Alberto Iozzi

Universita degli Studi di Roma ( email )

Via Columbia n.2
Rome, rome 00100
Italy
39 06 7259 5923 (Phone)
39 06 204 02 19 (Fax)

Paola Valbonesi (Contact Author)

University of Padua - Department of Economics and Management, DSEA ( email )

via Del Santo 33
Padova, 35123
Italy
+39+049+8274058 (Phone)

HOME PAGE: http://www.decon.unipd.it

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