Essays on the Microfoundations of Competition and Choice in Public Service Delivery

Abstract

The way how public services are delivered has changed fundamentally in past decades. While in the 1970s most public services such as energy, water or telecommunications were provided by state-owned monopolists, nowadays these services are delivered by a large array of different providers. In many countries public service providers operate alongside private companies. In Germany, for example, electricity services are frequently offered by municipally-owned public utilities who directly compete with private, often multinational, companies. This is clearly a situation in which public sector organisations have to compete with other suppliers in order to stay in business, and thus can no longer rest on their monopolist-status. The same holds true for many other different types of public services. Looking at the European public infrastructure sectors such as gas, post, rail, airlines, electricity, local transport and telecommunications, we can see that these markets experienced massive market deregulations in past decades in terms of entry regulations, market structure and public ownership status. This can be illustrated by looking at the OECD’s market regulation indicators (Conway and Nicoletti, 2006). The main index1 ranges from 0-6, and higher values indicate a high degree of market regulation (for example the presence of a national monopoly), while lower values stand for larger degrees of deregulation, including lower entry barriers for competitors, a lower degree of market concentration, and ownership diversity. Figure 1 displays these developments for a period of 32 years, including all mentioned public infrastructure sectors, through a single country measure. Indeed, with no exception, European countries that have been included in OECD’s market regulation index experienced large deregulations of their public infrastructure markets.