文本說明分析9presentation

1、Lecture 9: Solutions III: NationalisationEconomics of RegulationP13428 Economics of Regulation9. Solutions III: NationalisationReading:Viscusi, Vernon & Harrington Chapter 14. (core reading)Last Week:Considered franchise bidding as a non-regulatory solution to the natural monopoly problemIntroduced

2、competition at the bidding stage to achieve allocative efficiency.Lecture 9: Solutions III: NationalisationEconomics of RegulationLast Week:Considered franchise bidding as a non-regulatory solution to the natural monopoly problemIntroduced competition at the bidding stage to achieve allocative effic

3、iency.Lecture 9: Solutions III: NationalisationEconomics of RegulationLast Week:Considered franchise bidding as a non-regulatory solution to the natural monopoly problemIntroduced competition at the bidding stage to achieve allocative efficiency.This Week:Nationalisation as the third (and final) pro

4、posed solution to the natural monopoly problemObjectives / incentives in nationalisation vs. private-ownershipEvidence on efficiency of nationalised vs. private firms.Lecture 9: Solutions III: NationalisationEconomics of RegulationIntroduction to Nationalisation:Private sector solutions so far invol

5、ved basic conflict between desired action of uninhibited private firms vs. government.Lecture 9: Solutions III: NationalisationEconomics of RegulationIntroduction to Nationalisation:Private sector solutions so far involved basic conflict between desired action of uninhibited private firms vs. govern

6、ment.Regulation sought to re-incentivise the firm by setting price / rate of return. but also created incentives for over-capitalisation / minimising cost-reductions / reducing quality.Lecture 9: Solutions III: NationalisationEconomics of RegulationIntroduction to Nationalisation:Private sector solu

7、tions so far involved basic conflict between desired action of uninhibited private firms vs. government.Regulation sought to re-incentivise the firm by setting price / rate of return. but also created incentives for over-capitalisation / minimising cost-reductions / reducing quality.Franchise biddin

8、g sought to introduce competition at the bidding stage. but required potential suitors, potentially competitive re-negotiable contracts.Lecture 9: Solutions III: NationalisationEconomics of RegulationIntroduction to Nationalisation:Private sector solutions so far involved basic conflict between desi

9、red action of uninhibited private firms vs. government.Regulation sought to re-incentivise the firm by setting price / rate of return. but also created incentives for over-capitalisation / minimising cost-reductions / reducing quality.Franchise bidding sought to introduce competition at the bidding

10、stage. but required potential suitors, potentially competitive re-negotiable contracts.Lecture 9: Solutions III: NationalisationEconomics of RegulationIntroduction to Nationalisation:Nationalisation fundamentally alters objectives of the firmNat. monopoly owned by the state, run in the interest of s

11、ocietymotivating aim is to achieve allocative efficiencystate-run firm produces at second-best price and outputLecture 9: Solutions III: NationalisationEconomics of RegulationIntroduction to Nationalisation:Nationalisation fundamentally alters objectives of the firmNat. monopoly owned by the state,

12、run in the interest of societymotivating aim is to achieve allocative efficiencystate-run firm produces at second-best price and outputWhat we are not talking about:Public good provision (where private provision cannot exist)e.g. fire service, defence, policing etc.Redistributive programs of provisi

13、on / reallocatione.g. welfare state, NHS.These are state-run, but not due to the natural monopoly problem, and in some cases could not be provided by the private sector.Lecture 9: Solutions III: NationalisationEconomics of RegulationUnderstanding Nationalisation:Decisions of nationalised firm driven

14、 by:- long-term interests of society: no shareholders, avoids hold-up and enables long-range planning / infrastructure investment. Lecture 9: Solutions III: NationalisationEconomics of RegulationUnderstanding Nationalisation:Decisions of nationalised firm driven by:- long-term interests of society:

15、no shareholders, avoids hold-up and enables long-range planning / infrastructure investment. Lecture 9: Solutions III: NationalisationEconomics of RegulationUnderstanding Nationalisation:Decisions of nationalised firm driven by:- long-term interests of society: no shareholders, avoids hold-up and en

16、ables long-range planning / infrastructure investment. - aim to maximise consumer surplus: not for profit, produce where AC=AR to maximise consumer surplus.Lecture 9: Solutions III: NationalisationEconomics of RegulationUnderstanding Nationalisation:Decisions of nationalised firm driven by:- long-te

17、rm interests of society: no shareholders, avoids hold-up and enables long-range planning / infrastructure investment. - aim to maximise consumer surplus: not for profit, produce where AC=AR to maximise consumer surplus.- aim for quantity and quality: no incentive to cut quality at expense of consume

18、rs as consumers are stakeholders.- aim for sustainable cost reductions: does want to reduce costs and therefore increase consumer surplus but only in social interest.Lecture 9: Solutions III: NationalisationEconomics of RegulationUnderstanding Nationalisation:Problem: how to incentivise concern for

19、social welfare.This motivation has to be intrinsic: the firm has no competitors, regulator, threat of losing market dominance. Lecture 9: Solutions III: NationalisationEconomics of RegulationUnderstanding Nationalisation:Problem: how to incentivise concern for social welfare.This motivation has to b

20、e intrinsic: the firm has no competitors, regulator, threat of losing market dominance. Managerial Model of the FirmHow do owners of a firm incentivise managers to work hard?Separation of ownership and controlImperfect monitoring of managersLecture 9: Solutions III: NationalisationEconomics of Regul

21、ationUnderstanding Nationalisation:Problem: how to incentivise concern for social welfare.This motivation has to be intrinsic: the firm has no competitors, regulator, threat of losing market dominance. Managerial Model of the FirmHow do owners of a firm incentivise managers to work hard?Separation o

22、f ownership and controlImperfect monitoring of managersCan we provide incentives for managers of public firms to be as concerned with social welfare as managers of private firms are with profit?Lecture 9: Solutions III: NationalisationEconomics of RegulationManagerial Model as Applied to Public Sect

23、or: Public PrivateOwnership The State Shareholders (aims) social welfare profit Control Hired Managers Hired Managers (aims) e ecompatible?Lecture 9: Solutions III: NationalisationEconomics of RegulationManagerial Model as Applied to Public Sector:Private Sector:Owners induce managers to maximise pr

24、ofit by:i) Relating pay to performance (profit)ii) Threat of takeover / collapse of firmiii) Recognition of value and activities in labour market.Lecture 9: Solutions III: NationalisationEconomics of RegulationManagerial Model as Applied to Public Sector:Private Sector:Owners induce managers to maxi

25、mise profit by:i) Relating pay to performance (profit)ii) Threat of takeover / collapse of firmiii) Recognition of value and activities in labour market.Lecture 9: Solutions III: NationalisationEconomics of RegulationPublic Sector:Owners do not have these tools available:iii) doesnt apply: no extern

26、al labour marketii) very unlikely: firm is publicly funded, takeover not possible.i) target isnt profit, its welfare. But how to measure? Quality vs. price, no comparisons to substitutes.Public Sector vs. Private Sector Performance:U.K. has history of large number nationalised industriesmany created

27、 during WWII e.g. coal, steel, dockyardsLecture 9: Solutions III: NationalisationEconomics of RegulationPublic Sector vs. Private Sector Performance:U.K. has history of large number nationalised industriesmany created during WWII e.g. coal, steel, dockyardssome state-funded infrastructure e.g. railw

28、ays, water, gas, electricity.some arose historically as government-funded investments where private markets could not finance innovatione.g. nuclear energy, British Airways, British PetroleumLecture 9: Solutions III: NationalisationEconomics of RegulationPublic Sector vs. Private Sector Performance:

29、U.K. has history of large number nationalised industriesmany created during WWII e.g. coal, steel, dockyardssome state-funded infrastructure e.g. railways, water, gas, electricity.some arose historically as government-funded investments where private markets could not finance innovatione.g. nuclear

30、energy, British Airways, British PetroleumLate 1980s: widespread privatisation of publicly-owned utilities- state provision perceived as inefficient- privatisation provided windfall e for governmentHow does firm performance rate before and after privatisation?Lecture 9: Solutions III: Nationalisatio

31、nEconomics of RegulationPublic Sector vs. Private Sector Performance:Basic problem in evaluating effects of privatisationLecture 9: Solutions III: NationalisationEconomics of RegulationObserve productivity, prices, costs etc. before and after privatisationBut changes in these might be due to other f

32、actors which occurred at the same timee.g. economy in recession (as in UK early 1990s)Which caused the change in productivity? Privatisation or recession?Public Sector vs. Private Sector Performance:Basic problem in evaluating effects of privatisationLecture 9: Solutions III: NationalisationEconomic

33、s of RegulationObserve productivity, prices, costs etc. before and after privatisationBut changes in these might be due to other factors which occurred at the same timee.g. economy in recession (as in UK early 1990s)Which caused the change in productivity? Privatisation or recession?Ideally measure

34、productivity changes against comparison groupi.e. group of firms who can be compared to privatised firm, but didnt undergo privatisation.If comparison group doesnt exist, have to rely on before and after.Before and After Privatisation StudiesFlorio (2003), Fiscal StudiesBritish before and after priv

35、atisation (1984)Lecture 9: Solutions III: NationalisationEconomics of RegulationBefore and After Privatisation StudiesFlorio (2003), Fiscal StudiesBritish before and after privatisation (1984)Lecture 9: Solutions III: NationalisationEconomics of RegulationSales: Revenue growth from calls fell post-p

36、rivatisation, rental and service growth also fell. but could be due to move to wider internet usage / price-cap regulation post-privatisation.Before and After Privatisation StudiesFlorio (2003), Fiscal StudiesBritish before and after privatisation (1984)Lecture 9: Solutions III: NationalisationEcono

37、mics of RegulationSales: Revenue growth from calls fell post-privatisation, rental and service growth also fell. but could be due to move to wider internet usage / price-cap regulation post-privatisation.Prices: 1984-1999 weighted average of tariff fell 50% as operating costs fell 30%. but could be

38、due to regulator imposing RPI-X.Before and After Privatisation StudiesFlorio (2003), Fiscal StudiesBritish before and after privatisation (1984)Lecture 9: Solutions III: NationalisationEconomics of RegulationSales: Revenue growth from calls fell post-privatisation, rental and service growth also fel

39、l. but could be due to move to wider internet usage / price-cap regulation post-privatisation.Prices: 1984-1999 weighted average of tariff fell 50% as operating costs fell 30%. but could be due to regulator imposing RPI-X.Profit: as % of turnover 21% 1960-79, 24% 1980-1984, but fell after privatisat

40、ion to 20%. but post-privatisation UK experienced prolonged recessionBefore and After Privatisation StudiesLabour costs: Employment fell 40% 1990 1995, labour costs remained constant (wages rose by equivalent amount). To what extent is this due to efficiency gains vs. recession?Lecture 9: Solutions

41、III: NationalisationEconomics of RegulationBefore and After Privatisation StudiesLabour costs: Employment fell 40% 1990 1995, labour costs remained constant (wages rose by equivalent amount). To what extent is this due to efficiency gains vs. recession?R&D Expenditures: fell by 25% 1990 1995, sugges

42、ts private firm less concerned with investment. but operating under regulatory price limits which decrease returns.On balance. difficult to disentangleeffects due to privatisationimpact of recessionimpact of regulatory activities.Lecture 9: Solutions III: NationalisationEconomics of Regulation R&D E

43、xpenditures: Example of poor graph:Lecture 9: Solutions III: NationalisationEconomics of RegulationGeneral Results, Privatisation Studies.Megginson and Netter (2001), Journal Economic Literature.Compare findings from large number of before and after studiesParker (1991)Studied 6 privatised firms 198

44、7-1990: British Gas, British , Rolls-Royce, Associated British Ports, Jaguar, Enterprise Oil.- productivity increased in 4/6 cases.- profitability increased in 3/6 cases.Lecture 9: Solutions III: NationalisationEconomics of RegulationGeneral Results, Privatisation Studies.Megginson and Netter (2001)

45、, Journal Economic Literature.Compare findings from large number of before and after studiesParker (1991)Studied 6 privatised firms 1987-1990: British Gas, British , Rolls-Royce, Associated British Ports, Jaguar, Enterprise Oil.- productivity increased in 4/6 cases.- profitability increased in 3/6 c

46、ases.Parker & Wu (1998)British Steel 1979-1994. Found total factor productivity and profitability increased in 5 years before 1988, but slowed after privatisation. Suggests workers responded to threat of privatisation?Lecture 9: Solutions III: NationalisationEconomics of Regulation A Comparison Group Study. (cited in Megginson & Netter)La Porta and Lopez (1999), Quarterly Journal of EconomicsSample of Mexican state and private-owned firms 1983- 1991. Match state owned fi