The scope of public organisations with productive functions: insights from the inefficiency of Italian local public transport

Di Foggia, Giacomo; A igo, Ugo A icle The scope o public o ganisa ions wi h p oduc i e unc ions: insigh s om he ine iciency o I alian local public anspo Eu opean Jou nal o Go e nmen and Economics (EJGE) P o ided in Coope a ion wi h: Uni e sidade da Co una Sugges ed Ci a ion: Di Foggia, Giacomo; A igo, Ugo (2015) : The scope o public o ganisa ions wi h p oduc i e unc ions: insigh s om he ine iciency o I alian local public anspo , Eu opean Jou nal o Go e nmen and Economics (EJGE), ISSN 2254-7088, Uni e sidade da Co una, A Co uña, Vol. 4, Iss. 2, pp. 134-154, h ps://doi.o g/10.17979/ejge.2015.4.2.4311 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/217742 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen (insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en, gel en abweichend on diesen Nu zungsbedingungen die in de do genann en Lizenz gewäh en Nu zungs ech e. Te ms o use: Documen s in EconS o may be sa ed and copied o you pe sonal and schola ly pu poses. You a e no o copy documen s o public o comme cial pu poses, o exhibi he documen s publicly, o make hem publicly a ailable on he in e ne , o o dis ibu e o o he wise use he documen s in public. I he documen s ha e been made a ailable unde an Open Con en Licence (especially C ea i e Commons Licences), you may exe cise u he usage igh s as speci ied in he indica ed licence. h p://c ea i ecommons.o g/licenses/by/4.0 Eu opean Jou nal o Go e nmen and Economics Volume 4, Numbe 2 (Decembe 2015) ISSN: 2254-7088 134 The scope o public o ganisa ions wi h p oduc i e unc ions: insigh s om he ine iciency o I alian local public anspo Ugo A igo, Uni e si y o Milano-Bicocca Giacomo Di Foggia, Uni e si y o Milano-Bicocca Abs ac I is a well-known ac ha e o ms necessa y o enhance compe i ion and make he economy mo e a ac i e play a majo ole in he Go e nmen ac i i y in Eu ope. Conside ing he I alian s a e o a ai s, his pape ocuses on he ine iciency o public p oduce s in he ligh o ce ain ma ke and legal impedimen s. This pape desc ibes key ba ie s ha unde mine he heal hy unc ioning o an impo an indus ial and se ice sec o o he I alian economy: speci ically local public anspo . This pape also sheds some ligh on his p oblem analysing he impac ha a con o e sial egula ion amewo k may ha e on an indus y and sugges s ha he deg ee o libe alisa ion a ec s he e u n on in es men s. JEL classi ica ion H11; H40; D78. Keywo ds S a e-owned en e p ises; e iciency; I aly; local public anspo ; compe i ion. Eu opean Jou nal o Go e nmen and Economics 4(2) 135 1. In oduc ion The economic li e a u e on public economics has o en analysed ela ionships be ween he go e nmen , socie y and he ma ke , ecu en ly o e alua e he ole o public o ganisa ions and he impac o public policies on he unc ioning o mode n ma ke s. Indeed, o e he pas decades, he e has been heigh ened in e es in he o ganisa ion and e iciency o public o ganisa ions wi h as consensus o essen ial key oles o mode n go e nmen s ha comp ehend he p o ec ion o indi iduals’ eedom, he edis ibu ion o esou ces and he mi iga ion o ma ke ailu es (Polli , 2004), acco dingly, many schola s ag ee on he good eason o he exis ence o go e nmen o ganisa ions wi h p oduc i e unc ions. A ela i ely young a ea o esea ch is he analysis o Eu opean in eg a ion on local go e nmen s alongside hei suble els. In his ega d, i is gene ally acknowledged ha public budge s in many Eu opean coun ies a e unde signi ican cons ain s. Schmid (2006) a gues ha he ins i u ional s uc u e has con ibu ed o al e he balance o powe among na ional ins i u ions and weakened na ional decision au onomy. The e iciency o he s a e-owned en e p ises o EU coun ies a ies widely, howe e a ailable in o ma ion on hei pe o mance is agile. Ne e heless, signi ican e en i minu e s eps o wa d a e being made in I aly, in ac , he publica ion o he da abase on SOEs (especially key accoun s a iables) has cons i u ed a conside able ad ance o e he p e ious si ua ion, allowing he knowledge o he main cha ac e is ics o such i ms, and acili a ing he e alua ion o pe o mance acco ding o he di e en indus ies. Wi h his in mind, i is unde lined ha he pe o mance can be s ongly a ec ed by a mul i ude o exogenous ac o s ha can’ be obse ed om ou analyses. A any a e, Pu nam e al. (1994) p o ide measu es o e alua e ins i u ional pe o mance gi en ha he quali y o he ins i u ion is s ongly co ela ed wi h g ow h (A nold e al. 2011). P io esea ch p o ides use ul inpu s using di e en app oaches and shows ha new challenges a ise o public o ganisa ions as hey ha e o deal wi h apid and accele a ing economic change, inc easing complexi y o egula o y issues, new echnologies and se ices, calls o openness, anspa ency and ci izen pa icipa ion (Pi lik e al. 2012). Re o ms mus be implemen ed and sus ained du ing imes when iscal cons ain s and budge consolida ion p essu es become inc easingly igh e since good legisla i e amewo ks can p omo e he heal hy unc ioning o he ma ke (A nold e al. 2011). Howe e , egula o y amewo ks (i) may be lawed by a ious ac o s ha unde mine hei public in e es aims, (ii) may in ol e cos s ha exceed hei expec ed bene i s; (iii) may suddenly become obsole e because o echnical de elopmen s o he e olu ion o demand. Many economis s end o be inclined o os e policies aimed a inc easing compe i ion in o de o inc ease e iciency (Ama al e al., 2009; Jonsson, 1984; Niskanen, 1973). Such compe i ion can also be gene a ed wi h he aid o con inuous p oduc i i y and e iciency compa isons be ween public bodies which p o ide simila ou pu . Likewise, o he au ho s ha e been s essing he impo ance o collabo a ion (En wis le and Ma in, 2005; Ha ley e al. 2013; Osbo ne and S okosch, 2013; Wa ne , 2011). In his pape he owne ship o en e p ises is also discussed, he e is in ac enewed in e es in he ole ha SOEs can play in p omo ing economic de elopmen , he ela ionship be ween SOEs and he go e nmen as a sha eholde , and he c i e ia used in assessing op ions o in es ing in o disposing o s a e-owned en e p ises. Gi en he impo ance o a well- unc ioning sec o and he p esence o ce ain indica ions ha compe i ion in he I alian local public anspo s uggles (Boi ani e al. 2009; IBL, 2013), we y o look a he easons o hese ine iciencies. A igo and Di Foggia ● The scope o public o ganisa ions wi h p oduc i e unc ions 136 In an e o o p o ide hese concep s wi h mo e de ails, we ocus on he pe o mance o he selec ed en e p ises ope a ing in i . As he indus y is s ongly egula ed and he beha iou o companies needs o be assessed in he con ex o he exis ing egula o y amewo k, we also look in b oad e ms a aspec s o he egula o y amewo k. We hen champion some condi ions o be achie ed o de ended, such equi emen s lies in he es ic ion o he spoil sys em, choice o managemen made om speci ic lis s o candida es wi h a ce i ied le el o expe ise and based on ee-access compa a i e selec ion p ocedu es and implemen a ion o aining schools and human esou ces de elopmen . App op ia e policies could p o ide ci izens wi h e icien se ices while a he same ime may con ibu e o he c ea ion o an open business en i onmen ha suppo s he compe i i eness o he indus y. Tha said, policies will ensu e ha se ices en us ed by open, anspa en and non-disc imina o y ende s, make a ailable he public se ice obliga ions and he p ocedu es o de e mining compensa ion, and de ine p ecisely he subjec o he ende and he amoun o in es men s. The esul s o ou analysis sugges a posi i e ela ion be ween open business en i onmen and p oduc i i y. Ne e heless his ela ion is only es ed using he e u n on equi y (ROE) as dependen a iable consis en ly wi h he I alian Minis y o Economics. We ind ha SOEs ope a ing in a highly libe alised ma ke (ene gy) ou pe o m hose ope a ing in local public anspo a ion. The emainde o his pape is s uc u ed as ollows: in he i s sec ion, we p o ide a e iew o ela ed li e a u e used o in oduce and suppo ou s a emen s. A e ha , he backg ound o he I alian si ua ion is p esen ed; his is ollowed by he in oduc ion o he I alian local public anspo ma ke . Nex , he empi ical analysis is pe o med. The discussion o he esul s and conclusion ollow. 2. Re iew o ele an li e a u e The e olu ion o he ole o go e nmen in mode n s a es has been well documen ed and a guably ep esen s one o he cu en mos hough -p o oking opics (Heady, 2001). A keys one in he classi ica ion o oles is he wo k o Musg a e (1959); p o iding o adjus men s in he dis ibu ion o income and he unc ion o con ibu ing o s abilisa ion, see Habe mas (1994), Dahl (1947) and Ke l (2002). Simila ly, Ba o (1958), Newman (1974), B own, Po oski and Van Slyke (2006), Haque, (2001) desc ibe he iple ole o go e nmen : secu i y o he indi iduals’ eedom, he edis ibu ion o esou ces, and he in e en ion in ma ke ailu es. While he i s wo oles – edis ibu ion o esou ces and he in e en ion in ma ke ailu es – de i e om he unc ioning o he ma ke , as explained in no ma i e economic heo y (Buchanan, 1968; Ma imo and Pouye , 2008), he secu i y o he indi iduals’ eedom is a condi ion sine qua non o mode n s a es (B ennan, 1977; Nozick, 1974). I migh be objec ed hough ha despi e many di e en app oaches ha e been p oposed in an e o o shed some ligh on his issue he iden i ica ion o scope and unc ions is ough (Hood, 2000). This is co obo a ed by Raadschelde s and Lee (2011) ha p esen a his o ical e iew o esea ch and in e ha mo e ecen esea ch has ended o ocus on di e en me hods, mainly ega ding o ganisa ion, me ics and pe o mance (F ede ickson e al 2003; G andy, 2009; Os om and Os om, 1971). A c i ical aspec howe e o many s udies aimed a assessing he pe o mance o public en i ies in complying wi h hei manda e is he compa abili y o me hodology and esul s cha ac e ised by ema kable he e ogenei y. In his sense, A onso e al. (2005) compu e public sec o pe o mance (PSP) and public sec o e iciency (PSE) indica o s and ind di e ences ha lead he au ho s o sugges pa hs o public sa ings. To he same oken Dabla-No is e al. (2012) p o ide a public in es men e iciency index ha cap u es he ins i u ional en i onmen unde pinning public in es men managemen ac oss ou di e en s ages: p ojec app aisal, selec ion, implemen a ion, and e alua ion. These s udies sugges ha Eu opean Jou nal o Go e nmen and Economics 4(2) 137 go e nmen s besides he public sec o play an impo an ole in he economic li e o he s a e h ough he e enue and expendi u e measu es. In he same ashion o he gene al oles ou lines abo e he essen ial economic pu poses o bi a ound a e axa ion and expendi u e measu es, s abilisa ion policies ( equi ed by he go e nmen o a ec he le els o agg ega e demand) and alloca ion, i.e. he p o ision o public goods ha canno be p o ided h ough ma ke mechanism. In ce ain cases, e.g. i he e is ma ke ailu e, go e nmen may be able o p o ide he good a a mo e op imal le el and p ice i compa ed wi h he ma ke equilib ium. As a ma e o ac he economic manda e jus i ies a p oduc i e unc ion, e en ually, in he o m o public p oduce s, bo h p o iding ma ke and non-ma ke goods and se ices. None heless, o he models o p o ision o ma ke and non-ma ke goods and se ices exis , e.g. public-p i a e pa ne ships a e g owing in popula i y as a go e ning model (Fo e e al., 2010). As a p oduce o goods and se ices, public adminis a ion plays a signi ican ole o he well-being o ci izens and he compe i i eness o coun ies. Hence, he ques ions o which ac o s imp o e pe o mance and aise capaci ies o a public adminis a ion o p o ide goods and se ices e icien ly a e a he hea o all discussions abou public sec o e o ms (Pi lik e al., 2012). To his ega d a g ea deal has been w i en abou he poli ics- ela ed ac o s ha impac on pe o mance o i ms (Al-Obaidan and Scully, 1992; Bo asso and Sembenelli, 2004; Sapienza, 2004; Shlei e and Vishny, 1994; Zheng e al. 2003). Ama al (2008) analyses he de e minan s o he pe o mance di e en ial be ween he p i a e and public managemen o u ban public anspo in Eu ope. Acco ding o he au ho , p i a e managemen is associa ed wi h lowe ope a ing cos s; howe e , he di e en ial can depend on he in e ac ion o he local au ho i ies' capaci y o expe ise and he p i a e ope a o s' au onomy ma gin. In e ms o o al cos s, no sys ema ic ad an ages should be expec ed om p i a e managemen . Despi e signi ican egional a ia ion bo h be ween and wi hin di e en egions, he e is widesp ead consensus on he scope o SOEs, o example, o co ec ma ke ailu es, p o ide public goods, and os e economic de elopmen (Kowalski, Büge, Sz aje owska and Egeland 2013). The p e iously men ioned p oduc i e unc ions jus i y ce ain public p oduce s (A igo and Di Foggia, 2013; Dewen e and Mala es a, 2001; Toninelli, 2000). Al hough he go e nmen as a egula o and owne o asse s opens a possibili y o a ou able ea men g an ed o SOEs (Kowalski, Büge, Sz aje owska and Egeland, 2013), i may be a gued ha he e is, howe e , s ill li le eliable in o ma ion on hei e iciency and on he ad an ages hey may be enjoying because o hei owne ship since SOEs inc easingly compe e wi h p i a e i ms. Fi ms equen ly in e ac wi h public adminis a ion in many di e en ways and in a a ie y o di e en ci cums ances. In addi ion, i ms indi ec ly ely on public adminis a ion ou pu s. Thus, an e icien public adminis a ion ha e icien ly p o ides public goods and se ices and ha abso bs ela i ely ew public esou ces a ec s p oduc i i y and compe i i eness o i ms (A onso e al. 2005; Allum, 1974; Caland a, 1978; F a ianni and Spinelli,1982; Onga o, 2004; To es, 2004). O he au ho s p o ide pieces o e idence on he causes o ine iciency (Capano, 2003; Cassese, 1993; Del Mon e and Papagni, 2001; Tanzi, 1998). Bandie a e al. (2008) es ima e he cos o ac i e (i s p esence en ails di ec o indi ec bene i o he public decision-make ) and passi e (i s p esence does no ad an age he public decision-make ) was e om obse ed cos s o public se ices. The au ho s assess he impac on how e icien ly a ce ain public se ice is p o ided. Thei model ocused on gene ic goods pu chase which accoun o 40 pe cen o public spending o goods and se ices. Thei indings sugges ha he di e ence in p ices ac oss public bodies is p incipally due o a ia ion in passi e A igo and Di Foggia ● The scope o public o ganisa ions wi h p oduc i e unc ions 138 (83 pe cen o o al) a he han ac i e was e. Based on a e age o al cos (F ank, Be nanke and Johns on, 2007) show ha p oduc i e ine iciency implies an excess o p oduc ion cos s. O he no ewo hy and widely in es iga e elemen s ha concu o de e mine he a e age low pe o mance o I aly a e bo h clien elism (Caciagli, 2006; Della Po a and Vannucci, 1997; Ga cía, 2013; Guzzini, 1995) and co up ion. Also esul s o a ecen s udy (Fio ino e al. 2012) con i m e idence o a nega i e co ela ion be ween co up ion and g ow h. A he ime o w i ing a con o e sial opic is he unde pe o mance o local public anspo o LPT sec o . I is gene ally acknowledged ha public budge s, including hose dedica ed o co e public anspo , a e unde signi ican cons ain s. Recen aus e i y measu es ha e a ec ed his sec o oo. Be ween 2010 and 2012, he indus y wi nessed an o e all decline in esou ces (600 million) o -12 pe cen o public con ibu ions. The educ ion o public ans e s has igge ed a gene al endency o aise he p ice o icke s. Acco ding o a ecen ac - inding in es iga ion o he I alian Compe i ion Au ho i y (AGCOM, 2014), he ongoing si ua ion o gene al ine iciency and lack o inancial esou ces is la gely a ibu able o he owne ship, he managemen objec i es and he egula o y amewo k ha is laye ed and no always consis en . As highligh ed by Asque (2011), local public anspo has adi ionally been ope a ed by local s a e-owned en e p ises – SOEs. Boi ani e al. (2009) in es iga e how he owne ship and he p ocedu e o he selec ion o i ms ope a ing in he local public anspo sec o a ec hei p oduc i i y. In o de o compa e di e en ins i u ional egimes, hey ca y ou a compa a i e analysis o companies ope a ing in la ge Eu opean ci ies. The au ho s ind ha when i ms a e o ally o pa ially in public hands hei p oduc i i y is lowe . Mo eo e , i ms selec ed h ough compe i i e ende ing display highe o al ac o p oduc i i y. Howe e he e a e cases o SOEs success wo ldwide and some SOEs a e closing he gap wi h hei p i a e-sec o compe i o s. As a as we know, he e a e, howe e , ew s udies ha speci ically analyse SOEs based on p o i abili y measu es. Bo ai d and Lö le (2009) p o ide some highligh s on key concep s o managemen and pe o mance measu emen ha include p o i abili y a ios. In ac he p o i made by o ganiza ions can be e ec i ely e alua ed when compa ed o he amoun o esou ces and ac i i y equi ed o gene a e i . Re u n on in es men (ROI) is a widely used measu e o o e all pe o mance and he e a e wo key app oaches o ROI (Walsh, 2003). The i s app oach is based on he Re u n on To al Asse s (ROTA) o Re u n on Capi al Employed (ROCE) which ocuses on ope a ing e iciency o he o al en e p ise. The second app oach, employed in his pape , is based on he Re u n on Equi y (ROE), which concen a es on pe o mance e iciency as ansla ed in o e u n o sha eholde s. I is an icipa ed ha his app oach opens o se e al in e p e a ions. 3. Backg ound 3.1. Unsui abili y o egula ion p e en s he heal hy unc ioning o local ma ke s A b eak h ough in egula o y policy du ing he las decades has been he awa eness ha go e nmen objec i es o he u ili y indus ies can also ake bene i om acili a ing compe i ion (A igo and Di Foggia, 2013). The Eu opean Commission en o ces compe i ion ules owa ds a single ma ke by ensu ing ha all companies compe e equally and ai ly (Eu opean Commission, 2014a). This bene i s consume s, businesses and he economy as a whole. The compe i i e ma ke is p ima ily a selec ion mechanism o economic beha iou , e alua ed in e ms o e iciency, able o p o ec consume s and ul ima ely he gene al public om he e ec s o poo decisions made by p oduce s. Eu opean Jou nal o Go e nmen and Economics 4(2) 139 S ill, i compe i ion does no seem possible wi h ega ds o public o ganisa ions ha p oduce adminis a i e ac s, i may be in oduced o SOEs ha compe e wi h p i a e companies unde speci ic ules and in iable sec o s. This can in oduce adequa e compe i ion o se ices ha will be o e ed by many o ganiza ions using he same in as uc u e, as i is no economically con enien o duplica e i (OECD, 2004). To his ex en , A nold e al. (2011) unde sco e ha egula ion gene ally add esses public-in e es conce ns abou ma ke ailu es, including monopoly condi ions, ex e nali ies and asymme ic in o ma ion. In his con ex , a good egula ion can p omo e compe i ion in ce ain indus ies by ensu ing ha ma ke powe in na u al-monopoly segmen s is no used abusi ely and by p o iding he co ec incen i es o business pa icipan s. Howe e , egula o y amewo ks may be lawed by a ious ac o s, hus (i) some egula ions may d i away om hei o iginal public in e es aims, (ii) egula ions some imes in ol e cos s ha exceed hei expec ed bene i s and (iii) echnical de elopmen , he e olu ion o demand and p og ess in egula o y echniques can make he design o egula ions obsole e. E en i i does no c ea e e ec i e compe i ion, he sepa a ion o p oduc ion and dis ibu ion would make he in oduc ion o o ms o compa a i e compe i ion be ween supplie s ope a ing in di e en geog aphical a eas possible. The same me hod may also be in oduced in o de o e alua e he pe o mance o simila o ices in he ypically public a ea o he p oduc ion o adminis a i e ac s. 3.2. Deg ee o libe alisa ion The Wo ld Economic Fo um de ines compe i i eness as he se o ins i u ions, policies, and ac o s ha de e mine he le el o p oduc i i y o a coun y. A he oo s o compe i i eness a e he ins i u ional and mic oeconomic policy a angemen s ha c ea e he igh condi ions o a weal hy business en i onmen unde which businesses can g ow (Eu opean Commission, 2014b). By analysing eigh sec o s, Asque (2011) sugges s ha he di icul y o implemen libe alisa ion and egula o y e o ms in I aly may be explained by a ious concu en o ces, which ha e o do wi h: he en -seeking beha iou , he ise o ba ie s o en y agains compe i o s, and he isk o collusi e p ac ices be ween egula o s and egula ed. I becomes he e o e impo an o shed some ligh on ac o s ha impac he e iciency o I alian public adminis a ion.Table 1 gi es an idea abou he ank o libe alisa ion in di e en sec o s in I aly. Fo each sec o a numbe o c i e ia a e employed in o de o assess he exis ence o ba ie s o en y in, o ganiza ion wi hin, and exi om he ma ke . The exis ence o such ba ie s is in e ed om a numbe o quan i a i e as well as quali a i e indica o s. Among he o me , concen a ion indices, p ice dynamics, he public s. p i a e owne ship o he incumben s, and o he s uc u al indica o s a e conside ed. Among he la e , he Index o Libe alisa ion looks a such indica o s as he deg ee o unbundling o essen ial acili ies in ne wo k indus ies, he exis ence o iscal o legal disc imina ions agains he newcome s, he egula o y quali y, e c. A igo and Di Foggia ● The scope o public o ganisa ions wi h p oduc i e unc ions 140 Table 1: Index o Libe alisa ion (I aly) Sec o s 2007 2008 2009 2010 2011 2012 2012/07* Na u al Gas 48 54 52 55 62 64 +16 Pos 37 38 38 41 47 52 +15 Elec ici y 63 65 69 71 72 77 +14 Labou Ma ke 50 35 55 60 60 60 +10 Mo o way 32 32 29 29 28 40 +8 Financial Se ices 59 62 63 64 69 66 +7 P o essional o de s 46 46 47 47 47 52 +6 I aly ( o al) 47 47 49 48 49 52 +5 Telecommunica io n 40 35 39 41 42 45 +5 A 55 55 56 56 56 58 +3 Inland e enue 44 43 52 48 48 47 +3 Public adminis a ion 40 37 35 38 39 42 +2 Local public anspo 45 46 43 43 44 45 0 Ai ways 66 70 68 60 62 65 -1 Wa e 27 27 32 17 19 19 -8 TV 70 68 67 65 62 61 -9 Railways 49 49 49 41 36 36 -13 *Change o e he pe iod 2007 – 2012. Sou ce: IBL (2012), Libe alisa ion Index, page 41. Table 1 also shows he o e all ankings o he IBL libe alisa ion index, compa ing his yea ’s ankings wi h hose om he p e ious edi ion o he index, showing all sec o s anked oge he . As G aph 1 shows he IBL Index o Libe alisa ion appea s o be co ela ed wi h he Wo ld Economic Fo um’s Compe i i eness Index while i is nega i ely co ela ed wi h he OECD S a e Con ol indica o (The indica o co e s o mal egula ions in he a ea o s a e con ol o business en e p ises). These ela ionships suppo he idea ha he selec ed index cap u es ac o s ha a e impo an o de eloping he LPT indus y. On he same basis we see he IBL Libe alisa ion Index is aken as a e e ence o measu ing he libe alisa ion deg ee o wo I alian sec o s, namely LPT and ene gy o be used in ou analysis. Eu opean Jou nal o Go e nmen and Economics 4(2) 141 G aph 1: Co ela ion be ween IBL's Index o Libe alisa ions, WEF's Compe i i eness index and OECD S a e Con ol Indica o Sou ce: own elabo a ion based on IBL libe alisa ion index (IBL_Lib), OECS S a e Con ol indica o (OECD_STC), WEF compe i i eness index (WEF; GCI). Re e ence yea : 2013. 3.3. The owne ship o o ganisa ions The e a e well-known di e ences be ween go e nance o public and p i a e companies (Rainey e al. 1976) and he concep o go e nance is a g owing body o Eu opean li e a u e (Pe e s and Pie e, 1998). Al hough s a e-owned en e p ises as go e nmen asse s open a possibili y o a ou able ea men hese o ganisa ions may cope wi h mul iple, unclea , o con lic ing inancial and social objec i es. Poli ical in e e ence can p omp decisions ha h ea en a company’s inancial goals; he e o e, manage s can ind i ho ny o ma ch he p i a e sec o ’s pe o mance s anda ds. The de ining cha ac e is ics o such o ganisa ions a e ha hey ha e a dis inc legal o m and hey a e es ablished o ope a e in ma ke s e en in hey may also ha e public policy objec i es. To be e comp ehend he s uggle o public managemen and decision- aking p ocess one mus emembe ha adminis a i e ac ion wi hin he sphe e o he s a e ha p oduces adminis a i e ac s, is go e ned by igid w i en p ocedu es ha a e consis en wi h he jus ice/equali y objec i es ha adminis a i e ac ion pu sues. Ga one e al. (2013), unde line ha managemen disc e ion is a signi ican sou ce o ine iciency in municipal en e p ises. Public sec o o ganisa ions a e simila o p i a e companies since hey ha e hie a chical s uc u es ha impose manda o y alloca ions o p oduc i e ac o s. Howe e , while in p i a e companies pe sonal au ho i y as de ined by A ow (1974) is dominan , in public o ganisa ions impe sonal au ho i y p e ails, consis ing o w i en ules and laws and egula ions ha a e ela i ely igid and s able o e ime (A ow, 1974). In his way, public sec o o ganisa ions do no bene i om he ad an age ha p i a e companies ha e, ep esen ed by non- igidi y and he open and only pa ially p ede e mined con en o wo k con ac s. In p i a e companies, he ules and p ocedu es a e subjec o he leade ship, on he con a y, in public o ganisa ions, leade ship is subjec o ules. The e o e, in he case o poo legal A igo and Di Foggia ● The scope o public o ganisa ions wi h p oduc i e unc ions 148 he e a e con as ing s udies ocused on he e en ual poli ical in e e ence and on i s e ec i e abili y o p omp decisions ha h ea en a company’s inancial goals. Ou indings sha e a numbe o simila i ies wi h hose epo ed in some o he pape s abo e men ioned and in e ms o he models p esen ed in Table 6, esul s suppo he heo e ical assump ion ha di e en le els o libe alisa ion associa ed wi h di e en indus ial ac i i ies a ec he ROE. Appa en ly, a compe i i e en i onmen wi h a sound egula o y amewo k may enable imp o emen s in he p o i abili y o i ms, speci ically he pe o mance e iciency as ansla ed in o e u n o sha eholde s. In addi ion coe icien s associa ed wi h he dummy a iables ENERGY, posi i e (p<0.05), and LPT, nega i e (p<0.01) a e bo h signi ican , he e o e as pu o wa d, ou esul s show di e en p o i abili y o i ms ac oss di e en ma ke s, egula o y amewo ks and compe i ion le els. Gi en ha ou indings a e based on a limi ed numbe o i ms, he esul s om such analyses should consequen ly be ea ed wi h he u mos cau ion. Impo an limi a ions migh ha e in luenced he esul s ob ained, allowing al e na i e explana ions. In pa icula , as p e iously indica ed, i is possible ha ine iciency may be d i en mo e by omi ed o ces han by he a iables highligh ed in ou heo e ical and empi ical a gumen s. As pe he egula ion o local public se ices, he cu en si ua ion is a a s ands ill. Al hough he goal is o mo e om a sys em o a ibu ion o exclusi e igh s by issuing adminis a i e o de s o he libe alisa ion o he se ice, which en ails he consequen ee deli e y, some c i ical aspec s mus be conside ed, among o he s he public se ice obliga ions o be obse ed by he ope a ing en i y, he de ini ion o economic compensa ion and he issue o minimum s anda ds (e iciency and quali y) o se ices o be p o ided. We unde line he need o high quali y se ices g an ed in e icien and a o dable p ocedu es and p o iding all s akeholde s wi h he equi ed legal ce ain y. In his sense app op ia e policies would p o ide people wi h e icien se ices while a he same ime con ibu e o he c ea ion o an open business en i onmen ha suppo s he compe i i eness o he indus y. As a p emise, he simpli ica ion o he ma ke access p ocedu e, in e ms o ime equi ed o au ho isa ion is needed. A he same ime he widely ecognised lack o anspa ency in he cu en sys em impedes he e icien de elopmen o his ma ke . We claim ha he comple ion o he libe alisa ion and simul aneously he p i a isa ion o a numbe o en e p ises would pilo a be e alloca ion o esou ces and consequen ly o an inc ease o he demand (appa en ly unde he le el o he men ioned Eu opean coun ies). As a ma e o ac , acco ding o OECD (2006), SOEs ace explici di icul ies ega ding hei go e nance since a e o en e ec i ely p o ec ed om wo majo h ea s i.e. h ea o akeo e and bank up cy. Da a in Table 7 seem o con i m ha p oblems a ise when con ol o public en i ies exceed he 50 pe cen . We also ag ee wi h indings o he Compe i ion au ho i y AGCOM (2014) who ad ises ha he mos impo an aspec s o he ma ke de elopmen a e he p ope de ini ion o he a eas o public se ice, bo h in e ms o e i o y as ega ds he na u e o he se ices o e ed and he de ini ion o minimum se ices and he ela ed ques ion o he co ec quan i ica ion o he compensa ion o he public se ice obliga ions. Table 7: Ne Income pe employee and EBITDA ma gin (I aly - EU 15) coun y Public owne ship EBITDA Ne Income pe Employee IT >50.01% 8.05 -2.69 ≤ 50% 10.11 43.80 EU-15 >50.01% 11.18 18.39 ≤ 50% 13.24 74.39 Sou ce: own elabo a ion Ou esul s con ibu e o he li e a u e on he go e nance o I alian public anspo by ocusing on how di e en ma ke s uc u es in luence he p o i abili y o i ms. Resul s suppo leade s o public sec o o ganisa ions as well as policy make s. Eu opean Jou nal o Go e nmen and Economics 4(2) 149 Ou esea ch sugges s ha , as pe he p o i abili y o i ms wi hin he LPT sec o , SOEs could boos hei p oduc i i y. Howe e , companies and o he o ganisa ions and policy make s need o add ess conside able challenges i hey a e o cap u e he ull po en ial o such ma ke s. 5.1. Conclusion In his pape , we ha e highligh ed ha public o ganisa ions wi h p oduc i e esponsibili ies – public p oduce s – may ace mul iple p oblems linked o he owne ship, he managemen , he egula o y amewo k and he deg ee o compe i ion o he ma ke s in which hey ope a e. This is done in con o mi y wi h he indings o he Eu opean Commission (2014b) epo on compe i ion as i shows ha compe i ion en o cemen helps p omo ing g ow h and compe i i eness o s a es, p e en s dominan companies om expelling compe i o s om he ma ke , keeps ma ke s open and e icien , and c ea es he condi ions o lowe inpu p ices o he indus y. As pe he go e nmen expendi u e ela ed o SOEs (also in he o m o s a e aid), policies aimed a en o cing compe i ion help o s ee public esou ces owa ds g ow h-enhancing objec i es. Indeed, on he one hand we ha e s essed ha like unlaw ul go e nmen subsidies, unp oduc i e go e nmen expendi u e in SOEs can dis o he le el playing ield, e ec supe luous ba ie s and unde mine he g ow h po en ial. On he o he hand, we ha e also poin ed ou ha go e nmen suppo and in e en ion can also ha e a posi i e impac when i is well- a ge ed. We ad oca e ha e iciency and p o i abili y p oblems a ise in ma ke s cha ac e ised by biases in some o he abo e men ioned aspec s which h ea en compe i ion. This is pa icula ly ue in hose ma ke s whe e go e nmen s end o in e ene o p o ec incumben s. Focusing on local public anspo , we ha e highligh ed c i ical aspec s ha ha e a nega i e impac on ma ke de elopmen . Speci ically, he e idence o his s udy and he ela ed li e a u e poin s owa ds he idea ha bo h exogenous ac o s like he egula o y amewo k and he le el o compe i ion coexis wi h endogenous ac o s (owne ship and size) and mu ually concu o he ine iciency o LPT. Gi en hese poin s, we ha e unde lined ha he esul s o ou es ima es ein o ce ou a gumen s. Ou esul s endow p elimina y suppo o ou assump ions. O e all, he esul s o he h ee eg ession analyses e eal a numbe o signals on how he ma ke s uc u e impac s on he employed measu e o pe o mance, he ROE. Indeed, coe icien s associa ed wi h he a iables aimed a iden i ying he ene gy and LPT ma ke s, con i m he be e pe o mance o i ms ope a ing in he ene gy ma ke . The indings a e no ep esen a i e o he en i e SOEs uni e se i s ly because o he lack o consis en and obus in o ma ion and secondly because in line wi h he opening decision his pape does no add ess in de ail he po en ial addi ional a ec ing o ces. The esul s howe e will be us ed conside ing he uni o mi y wi h mos o he dedica ed li e a u e, hough he indings canno be gene alised o o he ma ke s, coun ies o e en measu es o pe o mance. Ou esea ch sugges s ha policies aimed a con aining go e nmen expendi u e and in he mean ime inc easing he e iciency o he se ices p o ided will (i) ensu e ha se ice ope a o s a e en us ed by open, anspa en and non- disc imina o y ende s and p ocedu es, (ii) pu a he disposal o all po en ial ope a o s clea and sound ules o comply wi h he public se ice obliga ions and simpli y p ocedu es o de e mining compensa ion, and (iii) de ine p ecisely he subjec o he ende s in o de no o hampe conside ably he pa icipa ion o new en an s. The indings o his esea ch ha e manage ial implica ions oo. Go e nmen s should be able o selec op-le el managemen on SOEs who shall hen ha e au onomy. A e ha , he selec ion o pe sonnel (bo h a op and middle le els) should only be made om speci ic lis s de ailing candida es wi h ce i ied expe ise based on ee-access compa a i e selec ion p ocedu es. 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