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Ownership Versus Competition: Efficiency in Public Enterprise
Abstract and Figures
Certainly the introduction of product market competition into potentially competitive or, at least contestable, markets can improve performance. To take just one example, Morrison and Whinston (1986, 1986) estimate that even in the imperfectly contestable U.S. airline industry, the annual U.S. welfare gains from deregulation have been around $6 billion.
But this paper argues, and further buttresses empirically, that ownership also matters and matters a lot. This does not necessarily imply that private ownership is always preferable to public ownership. PCs also engage in rent-seeking where possible, but they will try to maximize realizable rents by (relatively) keeping down production costs. Of course, where there are massive economies of scale and scope, high entry barriers, or externalities, public ownership may be preferred. (see Vickers and Yarrow, 1988).
A non-trivial (although as this article has demonstrated, not an obvious) conclusion is that where competition is normatively appropriate, private ownership is preferable from an efficiency perspective. Given that major product markets have continued to become more concentrated in most countries (see, for example, Hart and Clarke, 1980), the relative importance of contestable ownership in inducing technical (if not allocative) efficiency is likely to increase.
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... Despite the empirical literature, three theories support the argument for superior private performance: Property Rights Theory, Public Choice Theory, and Agency Theory [43]. ...
... Using [43] theoretical framework, Property Rights Theory argues that under public management, managers cannot claim any generated savings, have no incentives for cost containment or launching new products/services, and thus do not act towards these goals. Public Choice Theory infers that bureaucrats seek to serve their own interests at the expense of common interest, leading to patronage policies and other issues. ...
This study analyzes the relevance of governance structure for efficiency in revenue collection by Brazilian Water Utilities (WUs). Data was collected from the National Information System on Sanitation (SNIS) for 127 Brazilian WUs, covering a balanced longitudinal panel from 2018 to 2022. Governance structures evaluated included Ownership (public or private) and Corporatization (publicly traded or not). In scientific databases, we did not find studies on the efficiency of specific WUs in collecting customer bills for services rendered and its relationships with this type of governance; thus, this would be the main innovative contribution of the study to the previous literature. In the first stage, the study utilized the Dynamic Slack Based Model (DSBM) to assess revenue collection efficiency. In the second stage, an econometric model with Generalized Estimating Equations (GEE) to explain the efficiency. The findings revealed a global average inefficiency of 50.47% in revenue collection. Corporatization was linked to higher collection efficiencies, while ownership type was significant, but with lower collection efficiency. Factors such as tariff accessibility, urbanization, and the COVID-19 pandemic also influenced efficiency. The study suggests regulatory bodies should consider these insights to implement policies that prevent inefficiencies from affecting the tariff system for services.
... State-owned fi rms themselves have political connections, so the eff ectiveness of monitoring over them is often questioned. In addition, due to the close relationship between state-owned fi rms and the government, they are more capable of engaging in political lobbying, thereby reducing the tax monitoring and tax avoidance penalties they face (Vining and Boardman, 1992). ...
... For a comprehensive discussion on optimal tax rules under imperfect competition, seeRequate (2006). 3 SeeVining and Boardman (1992) for a survey of 90 comparative studies; seeMegginson and Netter (2001) for a literature review on performance changes of privatized companies. ...
A wealth of evidence has shown the positive effects of better management practices on firms. More recent evidence has highlighted that ownership matters for several developing and advanced economies. However, this relationship has not been studied extensively for economies in the Middle East and North Africa (MENA), a region where the presence of the government in the productive sphere looms large. This study addresses a gap in the literature by exploring how partial government ownership can influence management practices of medium and large formal firms in the MENA. Using two waves of Enterprise Surveys undertaken in 2013 and 2019/2020, the evidence points at a negative relationship between partial government ownership and management practices in the developing MENA region. The findings pass several robustness checks.
对能源公用事业商品属性的认识和治理方式的研究，是推动能源市场化改革的重要理论基础。为此，在排他性和竞争性的物品分类基础上，构建基于社会公共性质和技术发展水平的物品分类动态框架，并基于此分类框架，探讨电、气、热三类网络型能源公用事业的商品属性和治理方式。本文的核心观点认为：网络型能源公用事业提供的产品可区分为“能源品”和“运输服务”，其中能源品的商品属性趋近于私人商品，而运输服务趋近于准公共物品。能源公用事业治理方式的核心在于在体制机制上解构“能源品”+“运输服务”的传统运营模式，不断深化落实“管住中间、放开两头”的改革总思路，从而持续稳步推进能源体制改革。
The widespread use of government contracting opens up learning opportunities in public organizations’ engagements with private contractors. However, whether public organizations utilize these opportunities to improve their practices has scant coverage in the government contracting literature. We adapt insights from the organizational learning literature, develop an argument on the learning logic in government contracting, and examine manager perceptions of learning outcomes and whether intra- and inter-organizational and contextual conditions shape the learning outcomes. The argument is assessed against survey data reporting on the municipal park and road managers’ contracting experiences in Scandinavia. The findings show that government contracting in the context of the study is associated with positive learning outcomes and indicates possible tradeoffs between conventional cost-driven and learning strategies. The implications contribute to discussions about the role and benefits of government contracting beyond cost savings in the post-NPM reform era.
This book focuses on the relationship between private and public education in a comparative context. The contributors emphasize the relationship between private choices and public policy as they affect the division of labor between public and private non-profit schools, colleges, and universities. Their essays examine the kinds of choices offered by each sector, as well as the effects of present and proposed public policies on the intersectoral division of labor. Written from neither a pro-private nor a pro-public point of view, the contributors point to the ways in which they believe one sector or the other may be preferable for certain goals or groups.
In this work the authors present a general theory of bureaucracy and use it to explain behaviour in large organizations and to explain what determines efficiency in both governments and business corporations. The theory uses the methods of standard neoclassical economic theory. It relies on two central principles: that members of an organization trade with one another and that they compete with one another. Authority, which is the basis for conventional theories of bureaucracy, is given a role, despite reliance on the idea of trade between bureaucracies. It is argued, however, that bureaucracies cannot operate efficiently on the basis of authority alone. Exchange between bureaucrats is hampered because promises are not enforceable. So trust and loyalty between members of bureaucratic networks play an important part. The authors find that vertical networks promote efficiency while horizontal ones impede it.
In recent years, economic analysis of advanced capitalist economies has paid increasing attention to the nature and determinants of the forces governing the size and growth of the corporations of which they are composed. Macro-economic models, describing the growth rate of the system as a whole, of course go back more than a quarter of a century (or much further if the contributions of the classical nineteenth-century writers are included), but most of these theories have left open the question of whether we should best see the growth of the system as a direct aggregation of the growth of the parts, or whether the parts mainly respond passively to underlying forces pervading the whole. More generally, ‘macro-’ and ‘micro-’ theory in this area have not been very well integrated, and the typical general model of the modern economy often appears almost indifferent to widely differing interpretations of the corporate function.
At first blush it is remarkable how little work has been done by economists on a subject so popular and contentious in the political arena. At second blush there is perhaps little surprise given the huge pitfalls of a conceptual and measurement variety and the difficulty, at least in this country, of finding the two species in coexistence in the same product area. The recent surge of cost studies has, belatedly, drawn on the wide variety of institutional forms in certain industries in North America. Even so the coverage is patchy. Electricity has been well studied and there has been some work on water supply, railways, urban transport and airlines. In these areas output is generally subject to user charges. This paper therefore focuses on areas of a semi-commercial’ nature so that health and education are not covered though the temptation could not not be resisted of including an area both fecund in its variety of institutional forms and one where economists seem to have found their true home, refuse collection. There is a problem in specifying what is meant by performance and how it is measured. There is, on the other side of the coin, a problem in knowing what can be deduced from those things that can sometimes be measured, that is relative costs and relative profitability.