Mixed Public-Private Enterprises in Europe: Economic Theory and an Empirical Analysis of Italian Water Utilities. Bruges European Economic Research (BEER) Papers 4/July 2006

Mixed enterprises, which are entities jointly owned by the public and private sector, are spreading all over Europe in local utilities. Well aware that in the vast majority of cases the preference of local authorities towards such governance structure is determined by practical reasons rather than by the ambition to implement new regulatory designs (an alternative to the typical “external” regulation), our purpose is to confer some scientific value to this phenomenon which has not been sufficiently investigated in the economic literature. This paper aims at proposing an economic analysis of mixed enterprises, especially of the specific configuration in which the public partner acts as controller and the private one (or “industrial” partner) as service provider. We suggest that the public service concession to mixed enterprises could embody, under certain conditions, a noteworthy substitute to the traditional public provision and the concession to totally private enterprises, as it can push regulated operators to outperform and limit the risk of private opportunism. The starting point of the entire analysis is that ownership allows the (public) owner to gather more information about the actual management of the firm, according to property rights theory. Following this stream of research, we conclude that under certain conditions mixed enterprises could significantly reduce asymmetric information between regulators and regulated firms by implementing a sort of “internal” regulation. With more information, in effect, the public authority (as owner/controller of the regulated firm, but also as member of the regulatory agency) can stimulate the private operator to be more efficient and can monitor it more effectively with respect to the fulfilment of contractual obligations (i.e., public service obligations, quality standards, etc.). Moreover, concerning the latter function, the board of directors of the mixed enterprise can be the suitable place where public and private representatives (respectively, welfare and profit maximisers) can meet to solve all disputes arising from incomplete contracts, without recourse to third parties. Finally, taking into account that a disproportionate public intervention in the “private” administration (or an ineffective protection of the general interest) would imply too many drawbacks, we draw some policy implications that make an equitable debate on the board of the firm feasible. Some empirical evidence is taken from the Italian water sector.

Do Clusters Generate Greater Innovation and Growth? An Analysis of European Regions. Bruges European Economic Research (BEER) Papers 21/October 2011

The analysis of clusters has attracted considerable interest over the last few decades. The articulation of clusters into complex networks and systems of innovation -- generally known as regional innovation systems -- has, in particular, been associated with the delivery of greater innovation and growth. However, despite the growing economic and policy relevance of clusters, little systematic research has been conducted into their association with other factors promoting innovation and economic growth. This article addresses this issue by looking at the relationship between innovation and economic growth in 152 regions of Europe during the period between 1995 and 2006. Using an econometric model with a static and a dynamic dimension, the results of the analysis highlight that: a) regional growth through innovation in Europe is fundamentally connected to the presence of an adequate socioeconomic environment and, in particular, to the existence of a well-trained and educated pool of workers; b) the presence of clusters matters for regional growth, but only in combination with a good ‘social filter’, and this association wanes in time; c) more traditional R&D variables have a weak initial connection to economic development, but this connection increases over time and, is, once again, contingent on the existence of adequate socioeconomic conditions.

Sustainability and solidarity – basic ideas of new financial structures. Policy Brief #2012/07

Federal financial structures which include fiscal equalization between the states are and will remain to be indispensable. Such structures are required to equalize the significant regional economic differences which exist within the federal republic and to ensure sufficient funding for the responsibilities of the public sector across the nation. The current federal financial structures have a number of structural flaws which regard both the criteria for tax distribution, the design of the debt brake and the role of municipalities. The financial structures will have to be revised beginning in 2020. The objective is to consolidate in the long term the budgets of federation, state and municipal governments and to safe-guard a modern welfare state.

Multilateral Interchange Fees: Competition and regulation in light of recent legislative developments. ECRI Research Report No. 14, 31 January 2014

Two-sided payment card markets generate costs that have to be distributed among the participating actors. For this purpose, payment card networks set an interchange fee, which is the fee paid by the merchant’s bank to the cardholder’s bank per transaction. While in recent years many antitrust authorities all over the world - including the European Commission - have opened proceedings against card brands in order to verify whether agreements to collectively establish the level of interchange fees are anticompetitive, the Reserve Bank of Australia – as a regulator - has directly tried to address market failures by lowering the level of interchange fees and changing some network rules. The US has followed with new legislation on financial consumer protection, which also intervenes on interchange fees. This has opened a strong debate not only on legitimacy of interchange fees, but also on the appropriateness of different public tools to address such issues. Drawing from economic and legal theories and a comparative analysis of recent case law in the EU and other jurisdictions, this work investigates whether a regulation rather than a purely competition policy approach would be more appropriate in this field, considering in particular, at EU level, all of the competition and regulatory concerns that have arisen from the operation of SEPA with multilateral interchange fees. The paper concludes that a wider regulation approach could address some of the shortcomings of a purely antitrust approach, proving to be highly beneficial to the development of an efficient European single payments area.

Labour Supply Curves for EU Member and Candidate States: An applied general equilibrium analysis. Factor Markets Working Paper No. 26, June 2012

This paper introduces a more sophisticated modelling of the labour market functioning of the European member and candidate states through the introduction of labour supply curves in an applied general equilibrium model. A labour supply curve offers a middle way in labour supply modelling, sitting between the two commonly adopted extremes of spare capacity and full employment. The first part of the paper outlines the theoretical foundation of the labour supply curve. Real world data is then used to derive labour supply curves for each member state, along with Croatia and Turkey. Finally, the impact of the newly specified labour markets on the results of an illustrative scenario involving reform of the common agricultural policy is explored. The results of computable general equilibrium analysis with the labour supply curve confirm the theoretical expectation that modelling the labour supply through an upwards-sloping curve produces results that lie between the extremes of spare capacity of the labour factor and fully employed labour. This specification captures a greater degree of heterogeneity in the labour markets of the member and candidate states, allowing for a more nuanced modelling of the effects of policy reform, including welfare effects.