How regulation affects efficiency and investments in the water sector: a theoretical approach and a case study of the Italian water integrated system in Tuscany

My thesis analysed some aspects of water sector regulation. It has two theoretical chapters and a case study. In the first chapter, I used a simple model in order to describe the effect of tariffs regulation on the efficiency of the water providers and to give one possible justification to revising the tariffs method so often as Arera has been doing. In the last part of the chapter, I analyse theoretically another segment of the tariff methods: the incentive to improve efficiency. I found out that the type of incentive in the Italian tariff methods works only for the firms that have the operative costs near the average. In the second chapter, with a variation of the basic model, I analysed the effect of a two-level system of regulation (one National Authority and several Local Authorities) on the investments made by water providers. I introduced in the model the Local Authorities staff's skill and expertise. Smith (2000) described the advantages and the disadvantages of centralised and decentralised systems of regulation and Danesi at al. (2008) applied that analysis to the Italian case suggesting that a two-level system could have the benefits from both types of regulation. I try to add new elements that provide other possible justification for a system with a national Authority and several sub-national Authorities. In the third chapter, I used the Tuscan Water system as a case study. I explore the Tuscan data to see the actual results of the regulation, in an environment with relatively good local regulator, on a set of providers with mixed ownership where the public administration have the majority. I inferred that providers' mixed property seems to be a good structure to balance achieving efficiency and increasing investments with tariffs control, confirming and expanding Macchiati et al. (2019)