What is it about?
What drives the productivity dynamics of infrastructure companies in the digital era? We study total factor productivity (TFP) enhancers of transportation, utility, energy, telecom, and postal service companies in 14 countries.
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Why is it important?
We find that more financially developed countries utilize economies of scale for network services companies through better use of financial resources. In contrast, we find diseconomies of scale for energy companies in some countries. Moreover, young network firms improve TFP growth faster than their peers in countries with fewer product market regulations. Therefore, policies should remove entry barriers while facilitating the departure of old and low-productivity firms from network markets.
Perspectives
Large utility and transportation companies display a higher rate of TFP growth, indicating that a competition policy to encourage M&As would be prudent for the utility/transportation sectors to maximize economies of scale. Policymakers should offer well-targeted fiscal incentives for intangible investments to boost TFP because the accumulation of intangible assets such as digital technology promotes more scale economies through network effects.
Dr. Ryota Nakatani
International Monetary Fund
Read the Original
This page is a summary of: Productivity drivers of infrastructure companies: Network industries utilizing economies of scale in the digital era, Annals of Public and Cooperative Economics, January 2023, Wiley, DOI: 10.1111/apce.12412.
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