This paper evaluates the performance of Italian local public enterprises (LPEs) with respect to their private sector counterparts.
We address the following questions:
- do LPEs perform worse than (comparable) private firms?;
- does the performance gap depend on the ownership structure (the share held by the public) or on the market structure (the degree of competition in the sector)?;
- which are the main determinants of LPEs' performance in terms of productivity?
The main findings - which are robust to the possible endogeneity of the ownership structure - are as follows:
- LPEs perform less well than private companies by about 8 percent in terms of TFP;
- although both ownership structure and market structure matter, our results suggest that the ownership structure is more important; and
- the performance gap of LPEs with respect to private firms seems to be driven by over-capitalization rather than by over-employment.