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Regulation and Measurement of the Productivity Offset

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  • Uri, Noel D.

    (Common Carrier Bureau, Federal Communications Commission, Washington, DC)

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    Abstract

    Calculation of the productivity offset or the X-factor used in setting price caps has a fundamental flaw when it is based on conventional growth accounting total factor productivity analysis. The problem is discussed in the context of incentive regulation used by the Federal Communications Commission in the United States and the appropriate correction is indicated. An example of the problem and its correction, using the access charge for interstate service in telecommunications, is provided. The correction shows that the appropriate X-factor is 9% greater than that based on conventional growth accounting total factor productivity analysis.

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    Bibliographic Info

    Article provided by Queensland University of Technology (QUT), School of Economics and Finance in its journal Economic Analysis and Policy (EAP).

    Volume (Year): 31 (2001)
    Issue (Month): 2 (September)
    Pages: 187-203

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    Handle: RePEc:eap:articl:v:31:y:2001:i:2:p:187-203

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    Keywords: Accounting; Factor Productivity; Productivity; Regulation; Telecommunication;

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    1. Crew, Michael A & Kleindorfer, Paul R, 1996. "Incentive Regulation in the United Kingdom and the United States: Some Lessons," Journal of Regulatory Economics, Springer, vol. 9(3), pages 211-25, May.
    2. Sherman, Roger, 1992. "Capital Waste in the Rate-of-Return Regulated Firm," Journal of Regulatory Economics, Springer, vol. 4(2), pages 197-204, June.
    3. Kridel, Donald J & Sappington, David E M & Weisman, Dennis L, 1996. "The Effects of Incentive Regulation in the Telecommunications Industry: A Survey," Journal of Regulatory Economics, Springer, vol. 9(3), pages 269-306, May.
    4. Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, December.
    5. Berndt, Ernst R. & Fuss, Melvyn A., 1986. "Productivity measurement with adjustments for variations in capacity utilization and other forms of temporary equilibrium," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 7-29.
    6. David Sappington, 1980. "Strategic Firm Behavior under a Dynamic Regulatory Adjustment Process," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 360-372, Spring.
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