Municipal Capitalism: from State to Mixed Ownership in Local Public Services Provision

Which are the determinants of the choice of ownership structure for a firm providing local public services? What are the consequences of this choice on the performance of these firms? To answer these questions we will use a unique database providing economic and financial data on 321 Italian firms born in the 2000-2008 period. These data are merged with economic, political, financial and territorial data on the first municipality (for the number of shares owned) participating them. To perform the analysis and control for endogeneity, a two-stage multinomial selection model is employed, in order to identify the causal effects in the case of more than two treatments. The empirical evidence indicates that the municipality political orientation and budgetary conditions matter in the choice of ownership structure. Moreover, while for operating efficiency the computed Average Treatment Effects seems to indicate mixed ownership as a good solution, the ‘canonical’ performance and employment indicators provide evidence in the opposite direction.