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Direct subsidies and compensation funds in financing of universal postal services

Author

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  • Leszek Borowiec

    (University of Economics and Human Sciences in Warsaw, Poland)

Abstract

Member States of the European Union are obliged to ensure access to universal postal services for all citizens. The aim of the study is to assess the effectiveness of direct subsidies and compensation funds as basic methods of financing universal postal services in the scope of incurred net cost on the example of selected postal operators in Europe and to indicate the results of application of such solutions. The scope of the study includes an evaluation of the direct subsidy mechanism applicable in Europe on the example of Belgium. A characterization of the legal framework of operation of the compensation fund and an analysis of the impact of the adopted financing mechanisms on the achieved level of profitability of the entity obliged to provide universal postal services in Poland were made. The thesis of the current study is that the mechanism of compensation for provision of universal postal services by means of a compensation fund on the Polish example is defective and ineffective from the point of view of market regulation and the designated postal operator. The study concludes by stating that the preferred form of net cost financing should be a full budget subsidy and that it is unjustified to charge the full value of the net cost as additional commitment to the operator. The research methods used include analysis of scientific literature, collection, comparison, classification and generalization of data and expert evaluation.

Suggested Citation

  • Leszek Borowiec, 2021. "Direct subsidies and compensation funds in financing of universal postal services," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(3), pages 545-564, March.
    • Handle: RePEc:ssi:jouesi:v:8:y:2021:i:3:p:545-564
    DOI: 10.9770/jesi.2021.8.3(34)
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    References listed on IDEAS

    as
    1. Poudou, Jean-Christophe & Roland, Michel, 2014. "Efficiency of uniform pricing in universal service obligations," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 141-152.
    2. Anderson, Simon P. & de Palma, Andre & Kreider, Brent, 2001. "The efficiency of indirect taxes under imperfect competition," Journal of Public Economics, Elsevier, vol. 81(2), pages 231-251, August.
    3. Anton, James J. & Vander Weide, James H. & Vettas, Nikolaos, 2002. "Entry auctions and strategic behavior under cross-market price constraints," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 611-629, May.
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    More about this item

    Keywords

    postal sector; net cost of universal service; loss on universal service; direct subsidies; compensation fund; unfair financial burden;
    All these keywords.

    JEL classification:

    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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