Public enterprise reforms and efficiency in regulated environments: the case of the postal sector

Purpose - This paper focuses on analyzing the effect that public reforms have on the efficiency of state-owned enterprises in regulated environments. Design/methodology/approach - The research is focused in the postal sector where public and private companies must obey a legal framework related to provide a universal service. The analysis is carried out using a panel of 7 European postal operators for the period 1997-2003. The activity analyzed was the letter mail division; we take as key variable the unit cost of a letter and use a translog cost function where as independent variables we include traffic levels, labor cost per employee, quality and availability of the service as well as the type of ownership (public or private). Additionally, in a second stage the geographical differences among countries are considered. Findings - Results indicate that postal operators that experienced organizational changes without being privatized, such as the Spanish and Greek operators, do not have higher unit costs than privatized postal operators like the one of Germany and the Netherlands. Moreover, we find that in all cases the operator of Ireland appear to be the most efficient. In this case restructuring process has been carried out giving an important leadership role to workers. This suggests us that labor culture could be a key variable to study when analyzing reform processes in public enterprises. Originality/value - Our findings show that in a regulated environment like in the postal sector, public and private companies can obtain similar efficiency levels in term of unit costs.

Evaluating active labor markets in Romania

We evaluate the presence of effects from joining one of four active labour market programs in Romania in the late 1990s compared to the no-program state. Using rich follow-up survey data and propensity score matching, we find that three programs (training and retraining, self-employment assistance, and employment and relocation services) had success in improving participants' economic outcomes and were cost-beneficial from society's perspective. In contrast, public employment was found detrimental for the employment prospects of its participants.

Union power, minimum wage legislation endogenous labor supplies and production

The objective of this work is to study the impact of the unions' bargaining power on production and wages. We present a model where a competitive final good is produced through two substitutable intermediate goods, one produced by unskilled labor and the other by skilled labor. Potential workers decide at their cost to become skilled or unskilled and, thus, labor supplies are determined endogenously. We find that the reallocation of the labor supplies due to changes in the unskilled (or skilled) unions¿ bargaining power may have a positive impact on the final goods production. At the same time, total labor earnings increase with the unskilled unions¿ bargaining power if the final goods production increases too. We also show that the minimum wage legislation has efects similar to an increase in the bargaining power of the unskilled unions.

Union power, minimum wage legislation endogenous labor supplies and production

The objective of this work is to study the impact of the unions' bargaining power on production and wages. We present a model where a competitive final good is produced through two substitutable intermediate goods, one produced by unskilled labor and the other by skilled labor. Potential workers decide at their cost to become skilled or unskilled and, thus, labor supplies are determined endogenously. We find that the reallocation of the labor supplies due to changes in the unskilled (or skilled) unions¿ bargaining power may have a positive impact on the final goods production. At the same time, total labor earnings increase with the unskilled unions¿ bargaining power if the final goods production increases too. We also show that the minimum wage legislation has efects similar to an increase in the bargaining power of the unskilled unions.

Recovery Risk and Labor Costs in Public-Private Partnerships : Contractual Choice in the US Water industry

We use an ordered logistic model to empirically examine the factors that explain varying degrees of private involvement in the U.S. water sector through public-private partnerships. Our estimates suggest that a variety of factors help explain greater private participation in this sector. We find that the risk to private participants regarding cost recovery is an important driver of private participation. The relative cost of labor is also a key factor in determining the degree of private involvement in the contract choice. When public wages are high relative to private wages, private participation is viewed as a source of cost savings. We thus find two main drivers of greater private involvement: one encouraging private participation by reducing risk, and another encouraging government to seek out private participation in lowering costs.

Financial development, labor and market regulations and growth

This paper investigates the importance that market regulation and financial imperfections have on firm growth. We analyse institutions af- fecting labor market as Employment Protection Laws (EP) and Product Market Regulation (PM). We show that together with the beneficial effects of financial development, a firm will get less financing, and thus investless, in a weak financial market (finance effect), the strictness of product and labor market regulations also affect firm growth (labor effect). In particular, we show that the stricter the rules the more detrimental the influence on growth in sectoral value added for a large number of countries. We also show that the labor effect overcomes the positive finance effect.

The Cost of ownership in the governance of interfirm collaborations

This paper investigates the selection of governance forms in interfirm collaborations taking into account the predictions from transaction costs and property rights theories. Transaction costs arguments are often used to justify the introduction of hierarchical controls in collaborations, but the ownership dimension of going from “contracts” to “hierarchies” has been ignored in the past and with it the so called “costs of ownership”. The theoretical results, tested with a sample of collaborations in which participate Spanish firms, indicate that the cost of ownership may offset the benefits of hierarchical controls and therefore limit their diffusion. Evidence is also reported of possible complementarities between reputation effects and forms of ownership that go together with hierarchical controls (i.e. joint ventures), in contrast with the generally assumed substitutability between the two.

Price competition under cost uncertainty: A laboratory analysis

We study the relation between the number of firms and price-cost margins under price competition with uncertainty about competitors' costs. We present results of an experiment in which two, three and four identical firms repeatedly interact in this environment. In line with the theoretical prediction, market prices decrease with the number of firms, but on average stay above marginal costs. Pricing is less aggressive in duopolies than in triopolies and tetrapolies. However, independently from the number of firms, pricing is more aggressive than in the theoretical equilibrium. Both the absolute and the relative surpluses increase with the number of firms. Total surplus is close to the equilibrium level, since enhanced consumer surplus through lower prices is counteracted by occasional displacements of the most efficient firm in production.

Inflation and factor shares

We use results from the literature on the determinants of price-cost margins to derive an equation relating labor's share of national income to the inflation rate (as well as to the output gap, the unemployment rate and the capital stock per worker). The equation is tested with a panel of 15 OECD countries. We obtain a robust positive relationship between inflation and the labor share. Our results suggest that disinflation is not distributively neutral, provide empirical support for the distinct concern about price stability shown by trade unions and employers' organizations, and help explaining the negative impact of inflation on growth.

The relevance of post-match LTC: why has the Spanish labor market become as volatile as the US one?

We present a Search and Matching model with heterogeneous workers (entrants and incumbents) that replicates the stylized facts characterizing the US and the Spanish labor markets. Under this benchmark, we find the Post-Match Labor Turnover Costs (PMLTC) to be the centerpiece to explain why the Spanish labor market is as volatile as the US one. The two driving forces governing this volatility are the gaps between entrants and incumbents in terms of separation costs and productivity. We use the model to analyze the cyclical implications of changes in labor market institutions affecting these two gaps. The scenario with a low degree of workers’ heterogeneity illustrates its suitability to understand why the Spanish labor market has become as volatile as the US one.

Labor productivity in Europe: evidence from a sample of regions

The present paper aims at analyzing the sources of productivity in Europe to account for its recent underperformance and identify potential geographic idiosyncracies. We study the productivity performance and its sources in a sample of ten European regions belonging to four countries (France, Germany, Italy and Spain). Exploiting the increasing availability of disaggregated data at regional level in Europe, we propose both a descriptive statistics and an econometric analysis of productivity sources since 1995. Our main finding is that the sources of labor productivity are rather heterogeneous across our sample but may be associated with regional or national idiosyncracies.

The Total fiscal cost of indirect taxation: an approximation using Catalonia's recent input-output table

In this note we quantify to what extent indirect taxation influences and distorts prices. To do so we use the networked accounting structure of the most recent input-output table of Catalonia, an autonomous region of Spain, to model price formation. The role of indirect taxation is considered both from a classical value perspective and a more neoclassical flavoured one. We show that they would yield equivalent results under some basic premises. The neoclassical perspective, however, offers a bit more flexibility to distinguish among different tax figures and hence provide a clearer disaggregate picture of how an indirect tax ends up affecting, and by how much, the cost structure.

Labor productivity in Spain: 1977-2002

This study examines the evolution of labor productivity across Spanish regions during the period from 1977 to 2002. By applying the kernel technique, we estimate the effects of the Transition process on labor productivity and its main sources. We find that Spanish regions experienced a major convergence process in labor productivity and in human capital in the 1977-1993 period. We also pinpoint the existence of a transition co-movement between labor productivity and human capital. Conversely, the dynamics of investment in physical capital seem unrelated to the transition dynamics of labor productivity. The lack of co-evolution can be addressed as one of the causes of the current slowdown in productivity. Classification-JEL: J24, N34, N940, O18, O52, R10

Pareto-improving optimal capital and labor taxes

We show a standard model where the optimal tax reform is to cut labor taxes and leave capital taxes very high in the short and medium run. Only in the very long run would capital taxes be zero. Our model is a version of Chamley??s, with heterogeneous agents, without lump sum transfers, an upper bound on capital taxes, and a focus on Pareto improving plans. For our calibration labor taxes should be low for the first ten to twenty years, while capital taxes should be at their maximum. This policy ensures that all agents benefit from the tax reform and that capital grows quickly after when the reform begins. Therefore, the long run optimal tax mix is the opposite from the short and medium run tax mix. The initial labor tax cut is financed by deficits that lead to a positive long run level of government debt, reversing the standard prediction that government accumulates savings in models with optimal capital taxes. If labor supply is somewhat elastic benefits from tax reform are high and they can be shifted entirely to capitalists or workers by varying the length of the transition. With inelastic labor supply there is an increasing part of the equilibrium frontier, this means that the scope for benefitting the workers is limited and the total benefits from reforming taxes are much lower.