Service quality in the electricity industry: The role of privatization and managerial behavior

This paper analyzes the relationship between privatization and service quality in the electricity industry, and tests the hypothesis that managerial behavior is a significant intervening factor. The sample includes 31 Italian distributors over the period 1998-2004; their quality performance is represented by continuity of supply, an aspect of quality that is both contractible and regulated. Results of the empirical analysis suggest that the transfer of shareholdings to private investors does not lead to quality degradation. The results also suggest that managerial dominance translates into a reduction in supply quality; this effect is likely to be particularly strong for public-sector utilities.