Should Publicly Funded Postal Services be Reduced?
Henrik Lindhjem and Simen Pedersen in Vista Analysis has published in Review of Network Economics. The publication builds on a study the authors conducted for the Norwegian Post and Telecommunications Authority in 2010-2011, and contains a Cost-Benefit Analysis of the Universal Service Obligation in Norway. Read the publication here
We conduct, to our knowledge, the first cost-benefit analysis of the universal service obligation (USO) in the postal sector. Three alternatives are analysed that reduce delivery frequency and/or delivery speed, with particular emphasis on quantifying the potential loss of consumer benefits. Social cost savings are analysed for the service provider, for the environment and for the government through lower levels of distortionary taxes. Although there are challenges involved in measuring the net welfare change, especially loss in consumer benefits, our results suggest that only the largest reduction in the USO may be justified on social efficiency grounds.