Objectives and Incentives: Evidence from the Privatisation of Great Britain's Power Plants

39 Pages Posted: 26 Apr 2017 Last revised: 24 Aug 2017

See all articles by Thomas Triebs

Thomas Triebs

Loughborough University - School of Business and Economics

Michael G. Pollitt

University of Cambridge - Judge Business School

Date Written: August 24, 2017

Abstract

Does privatisation increase firm productivity because the private owner’s objective is different, or because she is better able to control management? Is privatisation sufficient to improve productivity, or is it only effective in combination with competition? We answer these questions for Great Britain’s electricity industry privatisation. We separate the effects of changes in objectives from changes in incentives by assuming, that the former only affect labour but not fuel productivity. And assuming that effective competition was only introduced after privatisation, we are able to separately identify the effects of privatisation and competition. We find that privatisation increased labour but not fuel productivity: evidence for the importance of objectives. There is some evidence that effective competition increased labour, but not fuel productivity. If there was an additional effect of competition, it was weak.

Keywords: privatisation, competition, productivity, electricity generation

JEL Classification: L33, L22, L94

Suggested Citation

Triebs, Thomas and Pollitt, Michael G., Objectives and Incentives: Evidence from the Privatisation of Great Britain's Power Plants (August 24, 2017). Available at SSRN: https://ssrn.com/abstract=2958078 or http://dx.doi.org/10.2139/ssrn.2958078

Thomas Triebs (Contact Author)

Loughborough University - School of Business and Economics ( email )

Epinal Way
Leics LE11 3TU
Leicestershire
United Kingdom

Michael G. Pollitt

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 (0) 1223 339615 (Phone)
+44 (0) 1223 339701 (Fax)

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