State Ownership in Regulated Industries – SORI

The provision of utilities’ services in adequate quality and quantity and at fair prices requires large amounts of investment that is both irreversible and risky. Investment in infrastructure is crucial to both prices and quantities in the long run. But investment involves huge financial resources and therefore utilities firms could face the risk of financial distress if regulation fails to provide enough incentives. There is documental evidence for Europe that investment in infrastructures slowed down in the last twenty-thirty years. This delay is actually generating both welfare costs for consumers and systemic costs for the national economy since the lack or malfunctioning of infrastructures is viewed as an obstacle to economic growth. FEEM intends to investigate – both theoretically and empirically – the relationship between regulation, financing and investment decisions and how this interaction changes with utilities’ ownership (private vs. state control) structure.