The Dynamic Allocative Efficiency of a Public Utility: Swiss Telecommunications

Antonio Manzini and Philippe Thalmann

Swiss Journal of Economics and Statistics (SJES), 1994, vol. 130, issue II, 129-144

Abstract: Public utilities are typically endowed with the following characteristics that are likely to affect their performance: (1) no competitors, (2) political pressures and regulation, (3) soft budget constraints. This paper explores the efficiency of such a utility, the Swiss telecommunication monopolist, which should supply universal service at minimum cost. It develops a new approach that makes it possible to handle the dynamics introduced by capital accumulation under adjustment costs. Excessive costs are estimated at 1.5 percent for the 1957-1992 period. One half of the cost savings were obtainable by better intra-temporal input choice, the other half by smoothing the path of capital accumulation.

Date: 1994
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