The Economic Environment and Public Enterprise Behaviour: Belgian Railroads, 1950-86.

The purpose of this paper is to estimate the impact of variations in the economic environment on allocatively inefficient behavior by public enterprises, and to measure the implications of both allocative and technical inefficiency for the firm's costs and factor use. Empirical results for the Belgian railroad company suggest the importance of unemployment and the pressure experienced by managers to reduce the deficit as explanatory variables of allocative inefficiency. The implications of inefficiencies for factor use are found to be substantial, although the associated costs are quite small. Copyright 1993 by The London School of Economics and Political Science.