Regulation and Measuring Cost-Efficiency with Panel Data Models: Application to Electricity Distribution Utilities

Regulation and Measuring Cost-Efficiency with Panel Data Models: Application to Electricity... This paper examines the performance of panel data models in measuring cost-efficiency of electricity distribution utilities. Different cost frontier models are applied to a sample of 59 utilities operating in Switzerland from 1988 to 1996. The estimated coefficients and inefficiency scores are compared across different specifications. The results indicate that while the average inefficiency is not sensitive to the econometric specification, the efficiency ranking varies significantly across models. The reasonably low out-of-sample prediction errors suggest that panel data models can be used as a prediction instrument in order to narrow the information gap between the regulator and regulated companies. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Regulation and Measuring Cost-Efficiency with Panel Data Models: Application to Electricity Distribution Utilities

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Publisher
Springer Journals
Copyright
Copyright © 2004 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/B:REIO.0000040474.83556.54
Publisher site
See Article on Publisher Site

Abstract

This paper examines the performance of panel data models in measuring cost-efficiency of electricity distribution utilities. Different cost frontier models are applied to a sample of 59 utilities operating in Switzerland from 1988 to 1996. The estimated coefficients and inefficiency scores are compared across different specifications. The results indicate that while the average inefficiency is not sensitive to the econometric specification, the efficiency ranking varies significantly across models. The reasonably low out-of-sample prediction errors suggest that panel data models can be used as a prediction instrument in order to narrow the information gap between the regulator and regulated companies.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Dec 27, 2004

References

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