Institutions and Firms' Productivity: Evidence from Electricity Distribution in the EU

Abstract

Firms' productivity is influenced by internal and external institutions. Ownership is the core internal institutional feature of the firm, while the most important external institutional feature is the quality of government, which shapes the environment in which firms operate. We explore the relative role of these factors and their interaction in determining total factor productivity of electricity distribution firms in 16 EU countries. Using data from the Amadeus database of balance‐sheet information and from the Quality of Governance database, we find that when the quality of government is poor, public ownership is associated with lower productivity levels; however, public ownership is associated with higher productivity in countries characterized by higher quality of the institutional environment.

Effects of Privatization on Price and Labor Efficiency: The Swedish Electricity Distribution Sector

“…International experience also does not provide any clear cut predictions. Borghi et al (2016) study the interaction effects between quality of government and private ownership in determining the total factor productivity of electricity distribution firms using data from 16 EU countries. When the quality of government is poor, they find that private ownership is associated with higher productivity levels relative to public ownership.…”

Rent-seeking by politicians in state-owned enterprises

“…Many studies show that the efficiency of state enterprises is positively influenced by the introduction of corporate governance, good management, the existence of good economic and political institutions. In particular, as indicated by Bortolotti et al (2013) and Borghi et al (2016), there is a correlation between the efficiency of SOEs in network industries and the quality of political and economic institutions. Good state institutions, high standards of corporate governance, rotations in managerial staff determined by financial results and not political elections, allow to achieve better economic results.…”

Evaluating regulatory reform of network industries: a survey of empirical models based on categorical proxies

“…protection (Bortolotti et al, 2013). Alternatively, interactions between regulatory reform proxies and indicators of institutional quality could be useful to understand how the effectiveness of reforms varies with countries' institutional quality (see e.g., Borghi et al, 2016;Estache et al, 2006).…”