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International Handbook on Privatization

Edited by David Parker and David Saal

Privatization has dominated industrial restructuring programs since the 1980s and continues to do so. This authoritative and accessible Handbook considers all aspects of this key issue, including: the theory of privatization; privatization in transition, developed and developing economies; as well the economic regulation of privatized industries.
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Chapter 9: Postal Privatization in the United States

Michael A. Crew and Paul R. Kleindorfer


Michael A. Crew and Paul R. Kleindorfer Introduction In this chapter we examine the role of privatization in postal services, with the main emphasis being on the role of privatization in the case of the United States postal service (USPS). The problem is not an easy one. USPS has an inefficient organizational and governance structure that precludes alignment of market and efficiency incentives with investments and operations. At the same time, USPS has a universal service obligation (USO), which is both a curse and a blessing, in that it is the source of large costs but also represents the basis for legitimating its letter monopoly and other privileges. Finally, in the face of both of these factors, USPS has additionally an institutional governance structure with respect to its primary input, labour, that effectively precludes an efficient response to changing market conditions, especially any such conditions requiring a smaller labour force. Under the circumstances, it is exceedingly difficult to sort out what elements of USPS behaviour are absolutely essential for the viability of the USO and what elements are unnecessary infringements on the market in the form of anticompetitive behaviour. This is not a new problem in network industries. In the case of USPS it may be more severe because of the nature of the postal service, the nature of the USO and the politicization of decision making resulting from the public ownership in the USA and the oversight role exercised by the legislative and executive...

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