One more ride on the merry-go-round! Public ownership and delayed competition in local public services

This paper investigates the effect of public ownership on the use of competitive bidding to award local monopoly franchises. The empirical setting is provided by the Italian natural gas liberalization reform, which made competitive bidding to award gas distribution franchises at the municipality level compulsory. The paper shows that municipalities owning a capital share in a gas distribution network operator experience a reduction in the hazard of awarding. The paper provides additional tests to support the causal interpretation of the findings. First, the credibility of competitive procedures is tested. Second, the presence of a contemporaneous dependence structure in the data is taken into account to address the imitation effect among the municipalities served by the same operator.