Municipal Socialism or Municipal Capitalism? The Performance of Local Public Enterprises in Italy
37 Pages Posted: 5 Dec 2017
Date Written: November 29, 2017
This paper evaluates the performance of Italian local public enterprises (LPEs) with respect to their private sector counterparts. We address the following questions: i) do LPEs perform worse than (comparable) private firms?; ii) does the performance gap depend on the ownership structure (the share held by the public) or on the market structure (the degree of competition in the sector)?; iii) which are the main determinants of LPEs' performance in terms of productivity? The main findings – which are robust to the possible endogeneity of the ownership structure – are as follows: i) LPEs perform less well than private companies by about 8 percent in terms of TFP; ii) although both ownership structure and market structure matter, our results suggest that the ownership structure is more important; and iii) the performance gap of LPEs with respect to private firms seems to be driven by over-capitalization rather than by over-employment.
Keywords: local public firm, firm performance, instrumental variables
JEL Classification: L33, L25, H42, C26
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