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Privatisation, regulation and productivity in the Italian motorway industry

Author

Listed:
  • Luigi Benfratello

    (University of Torino and Ceris-CNR)

  • Alberto Iozzi

    (University of Rome "Tor Vergata" and University of Leicester)

  • Paola Valbonesi

    (University of Padua)

Abstract
The Italian highway industry has undergone an institutional and regulatory reform through the last decade, characterised by changes in ownership and a new price cap framework. To assess the effect of the reforms on firms’ performance, we use information on all the 20 Italian concessionaires over the 1992-2003 period and 1) estimate the technical progress in the industry, thereby providing a reference value for the X factor in the price cap formula; 2) assess the relative productivity of private vs. public concessionaires; 3) evaluate whether price cap regulation has induced firms to use resources efficiently, 4) determine the possible effect of the inclusion of the quality index in the price cap formula. We find that the introduction of a price cap regime does not increase firms’ productivity whereas a sharp increase in maintenance costs is recorded, arguably due to the quality indicator in the price cap formula. Furthermore, firms appear to have gained from the privatisation process and from a technical progress occurred in the period. We also find high density economies and a steady and large increase in traffic. Overall, these results suggest that the X factor has been set too conservatively in past years which in turn explains the high profits recorded by franchisees under price cap regulation.

Suggested Citation

  • Luigi Benfratello & Alberto Iozzi & Paola Valbonesi, 2005. "Privatisation, regulation and productivity in the Italian motorway industry," "Marco Fanno" Working Papers 0002, Dipartimento di Scienze Economiche "Marco Fanno".
    • Handle: RePEc:pad:wpaper:0002
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    Cited by:

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    2. Guerriero, Carmine, 2013. "The political economy of incentive regulation: Theory and evidence from US states," Journal of Comparative Economics, Elsevier, vol. 41(1), pages 91-107.
    3. Albalate, Daniel & Rosell, Jordi, 2019. "On the efficiency of toll motorway companies in Spain," Research in Transportation Economics, Elsevier, vol. 76(C).
    4. Baños-Pino, José F. & Boto-García, David & Zapico, Emma, 2021. "Persistence and dynamics in the efficiency of toll motorways: The Spanish case," Efficiency Series Papers 2021/03, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    5. Elisabetta Iossa, 2015. "Contract and procurement design for PPPs in highways: the road ahead," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 42(3), pages 245-276, September.
    6. Sarmento, Joaquim Miranda & Renneboog, Luc & Verga-Matos, Pedro, 2017. "Measuring highway efficiency : A DEA approach and the Malquist index," Other publications TiSEM 23264815-321e-45a3-83ee-9, Tilburg University, School of Economics and Management.
    7. Laurino, Antonio & Grimaldi, Raffaele, 2010. "The process of highway privatization in Italy and Japan," MPRA Paper 29146, University Library of Munich, Germany.
    8. Daniel Albalate & Jordi Rosell, 2016. "Persistent and transient efficiency on the stochastic production and cost frontiers – an application to the motorway sector," Working Papers XREAP2016-04, Xarxa de Referència en Economia Aplicada (XREAP), revised Oct 2016.
    9. Baños-Pino, José F. & Boto-García, David & Zapico, Emma, 2022. "Persistence and dynamics in the efficiency of toll motorways: The Spanish case," Economics of Transportation, Elsevier, vol. 31(C).
    10. Massiani, Jerome & Ragazzi, Giorgio, 2008. "Costs and efficiency of highway concessionaires: a survey of Italian operators," European Transport \ Trasporti Europei, ISTIEE, Institute for the Study of Transport within the European Economic Integration, issue 38, pages 85-106.
    11. Asquer, Alberto, 2011. "Liberalization and regulatory reform of network industries: A comparative analysis of Italian public utilities," Utilities Policy, Elsevier, vol. 19(3), pages 172-184.
    12. Zapico, Emma & Baños-Pino, José F. & Mayor, Matías, 2024. "Optimal toll rates accounting for traffic accidents: A productive efficiency approach," Transportation Research Part A: Policy and Practice, Elsevier, vol. 181(C).

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    More about this item

    Keywords

    Price Cap Regulation; Motorways;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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