Economic Factors Underlying Postal Reform in the European Union

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 21.05.2008, 12:15 - 13:30


Presentation by 

Paul R. Kleindorfer (Wharton School, University of Pennsylvania)


Across Europe, the restructuring of the postal sector across all 27 member states of the European Union (EU) is well underway. Shortly after the formal opening of the European internal market in 1992, the postal and logistics sector was recognized as a sector in need of reform. The Third Postal Directive, just approved in February of this year by the European Parliament and Council is moving the EU to a full opening of the postal market to competition by January 1, 2011 (full market opening is delayed for some EU countries until January 1, 2013). Full market opening means, among other things, no statutory monopoly privileges (that is, no “reserved area”) for any of the components of the postal value chain or for any postal products. Thus, competitors will be free to collect, sort and delivery on any frequency and to wherever they wish. The impending market opening is transforming the European postal sector from a slow-moving government service, with a limited range of traditional products and excess employment, into a profit-oriented industry. This paper and presentation will provide details of the on-going transformation of European postal markets, including some of the challenges that face traditional postal operators in coming to grips with the challenges of competition. These include foremost the continuing assurance of universal postal services (which entail considerable cross-subsidies that are likely to be the target of competitive entry) and the problem of labor. On the latter question, as the postal sector is labor-intensive (with upwards of 75% of its total cost of traditional mail services due to labor), a central question for policy makers is understanding, and perhaps mitigating, the effects of liberalization of the sector on employment (both in terms of “jobs” as well as social benefits). Several interesting developments related to this issue will be discussed.

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