Massimiliano Piacenza

Scope and Scale Economies in Multi-Utilities: Evidence from Gas, Water and Electricity Combinations

Within the recent debate on liberalization of local public services, the paper investigates the cost properties of a sample of Italian public utilities providing in combination gas, water and electricity. The estimates from a Composite Cost Function econometric model (Pulley and Braunstein, 1992) are compared with the ones coming from other traditional functional forms such as the Standard Translog, the Generalized Translog, and the Separable Quadratic. The results highlight the presence of global scope and scale economies only for multi-utilities with output levels lower than the ones characterizing the ‘median’ firm. This indicates that relatively small specialized firms would benefit from cost reductions by evolving into multi-utilities providing similar network services such as gas, water and electricity. However, for larger-scale utilities the hypothesis of null cost advantages is not rejected. Thus, it is possible that the recent diversification waves of leading companies are explained by factors other than cost synergies, so that the welfare gains that can be reasonably expected from such examples of horizontal integration, if any, are likely to be very low.

Corporatization and Firm Performance: Evidence from Publicly Provided Local Utilities

This study investigates the effects of the corporatization process – i.e., the transformation of a municipal firm into a limited liability company – on the production costs of local public services whose ownership is maintained by the local government. Theoretical analysis predicts that, even without privatization, corporatization is a potentially effective way to improve efficiency (Shleifer and Vishny, 1994; Stiglitz, 2000). We explore this issue by using information on a typical local utility, such as the bus service provided by public transit systems in Italy, which experienced a reform of the governance towards the corporatization structure during the ’90s. The results on a sample of 33 local bus companies over the period 1993-2002 show that, even if public ownership persists, the transformation of a municipal enterprise into an autonomous company – corresponding to the first stage of the corporatization of local utilities in Italy – or into a limited liability company exerts a reducing impact on production costs.

Struttura di costo e rendimenti di scala nelle imprese di trasporto pubblico locale di grandi dimensioni

In this paper we analyse the cost structure of a sample of Italian Local Public Transport (LPT) companies operating in large urban centres, so as to extend the evidence of some recent studies focused on small-sized and medium-sized operators. The main focus is to verify the presence and the extent of both scale and density economies. Technological characteristics of LPT systems are analysed by estimating a variable cost function model, which includes firm-specific fixed effects and considers three alternative supply-oriented output measures. The results show the presence of short-run and long-run scale economies, as well as of economies of network density, for both the average sample firm and companies belonging to the highest percentile (large-sized operators), regardless of the type of service provided (urban or mixed). This evidence suggests that, from a technological point of view, a proper LPT network should at least include a large urban centre and should be extended so as to embrace the intercity service too, while a regulatory policy aimed at fragmenting the served area in various sub-networks would imply a loss of productive efficiency.

Funding and School Accountability: The Importance of Private and Decentralised Public Funding for Pupil Attainment

We discuss the issue of how schools should be financed, concentrating on the role of private funding and public funding via sub-national governments as accountability mechanisms in the provision of educational services. The historical evolution of school regulation in Italy and Spain has created differences in the percentage of pupils who attend private schools, the percentage of private school funding coming from public and private sources, and the percentage of public school funding that comes from central or local government sources. We take advantage of these institutional diversities rooted in history to estimate the disciplining role of these different sources of funding in the context of an educational production function using PISA data. Our results provide support to both accountability mechanisms, and point to the presence of an important interplay between them. This article is protected by copyright. All rights reserved

How Does Fiscal Decentralization Affect Within-Regional Disparities in Well-Being? Evidence from Health Inequalities in Italy

This paper aims at investigating empirically the impact of fiscal decentralization reforms on inequality in well-being. In particular, we look at the effects on health inequalities following the assignment of larger tax power to the Italian Regions for financing their health expenditure, starting from the end of the Nineties. Exploiting large differences in the size of the tax base across Regions, we find that fiscal decentralization processes that attribute a greater tax power to lower government tiers, besides reducing inefficiencies of healthcare policies, seem to be effective in reducing also within-regional disparities in health outcomes. However, thedegree of economic development – on which depends the actual fiscal autonomy from Central government – significantly affects the effectiveness of these reforms and highlights the importance to take properly into account the specific features of the context where the decentralization of power is implemented.

Spatial inequality in access to healthcare: evidence from an Italian Alpine region

ABSTRACT Potential access to healthcare facilities is one of the main determinants of health. This study investigates the extent of spatial inequalities in potential access to care, and the relationship between potential access and patients’ behaviour. Taking Piedmont, an Italian Alpine region, as a case study, the analysis emphasizes that potential access is not uniform within the region and lower potential access is associated with other important indicators of socioeconomic deprivation. Moreover, people living in places characterized by poor access tend to use healthcare services less often than other citizens, and to be less mobile than the rest of the population.

Do public hospitals respond to changes in DRG price regulation? The case of birth deliveries in the Italian NHS

We study how changes in Diagnosis-Related Group price regulation affect hospital behaviour in quasi-markets with exclusive provision by public hospitals. Exploiting a quasi-natural experiment, we use a difference-in-differences approach to test whether public hospitals respond to an exogenous change in Diagnosis-Related Group tariffs by increasing C-section rates and/or by upcoding. Controlling for a detailed set of mother characteristics, we find that price changes did not affect the probability of a C-section. We do however find evidence of upcoding: Conditional on the birth delivery method (either a C-section or a vaginal delivery), public hospitals experiencing the largest price change exhibit a higher probability of treating patients coded as complicated. This finding suggests that even public hospitals may be sensitive to market incentives.

Fiscal Decentralization in Weak Institutional Environments: Evidence from Southern Italy

The quality of the institutional environment is a crucial issue in understanding the effective outcome of fiscal decentralization initiatives. However, there has been so far very little work on the subject. In this paper we contribute to fill this gap by considering the municipalities belonging to three provinces in Southern Italy and proxying the presence of a weak institutional environment with the capture of the local government by Mafia-type organizations. The analysis exploits an unforeseen change in fiscal policy by central government increasing Vertical Fiscal Imbalances and tests whether the effects of the lower tax decentralization on municipal spending are conditioned by the quality of the institutional environment. We find no sensible effects when the institutional environment is weak; on the contrary, a 4-6% increase in average spending per capita is estimated as a consequence of the lower tax autonomy in municipalities not captured by Mafia clans. The evidence is robust both to controls for potential confounding factors and sensitivity analyses. Overall, our findings suggest that some caution is needed before deciding to devolve more fiscal power to lower tiers of government.

Do Governments Effectively Stabilize Fuel Prices by Reducing Specific Taxes? Evidence from Italy

After the sharp increase of oil prices experienced in recent years, in order to stabilize fuel prices, many countries experimented automatic fiscal mechanisms consisting of a one-to-one reduction in specific taxes matching the rise in input prices. This study investigates the impact of these mechanisms on wholesale gasoline and motor diesel prices. Our estimates highlight that fiscal sterilization brings about a rise in final wholesale prices that more than compensate reduction in taxes. Hence, these “flexible” taxation mechanisms could not be a proper policy for stabilizing price levels in fuel markets.

Strategie multi-prodotto nei servizi di pubblica utilità: effetti della diversificazione e della densità dell'utenza

In the paper we study the cost structure of a sample of Italian utility providing in combination gas, water and electricity. The estimates from a Composite cost function model (Pulley e Braunstein, 1992) highlight that costs are lower when multi-utility operate in high-density areas and when they are diversified also in other services (heating, sewerage, waste water treatment). However, global scope and scale economies are present only for multi-utility operating at low levels of user density (usually small-sized firms in rural areas), whereas they are absent for firms facing a high user density (usually larger-scale companies in urban areas). The fact that utility in the latter group do not benefit from cost synergies across services suggests that their diversification might be due to managerial and/or market power motivations.