Public Ownership and Competition for the Market: Evidence from the Italian Gas Distribution Sector

Abstract

The paper investigates the effect of public ownership on regulatory commitment. The empirical setting is provided by the Italian natural gas liberalization reform, that made competitive bidding compulsory to award gas distribution franchises at municipality level. On average, a municipality owning a share of the capital in a gas distribution network operator experiences a reduction of the hazard of awarding. The paper provides additional tests to support the causal interpretation of the findings. First, the credibility of competitive procedures is tested. Second, the presence of a contemporaneous dependence structure in the data is taken into account to deal with the effect played by regulatory capture at municipality level.

Keywords: Public ownership; Competitive bidding; Regulation; Local governments.

JEL Classification: K20, K22, L32, L51, L95