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An analysis of cost efficiency in Swiss multi-utilities

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  • Farsi, Mehdi
  • Filippini, Massimo

Abstract

This study presents an empirical analysis of the cost efficiency of a sample of Swiss multi-utilities operating in the distribution of electricity, natural gas and water. The multi-utilities that operate in different sectors are characterized by a strong unobserved heterogeneity. Therefore the measurement of their performance poses an important challenge for the regulators. The purpose of this paper is to study the potential advantages of recently developed panel data stochastic frontier models in the measurement of the level of efficiency for multi-utility companies. These models are estimated for a sample of 34 multi-output utilities operating from 1997 to 2005. The alternative models are compared regarding the cost function slopes and inefficiency estimates. For the inefficiency estimates, the correlation between different models and the effect of econometric specification have been analyzed. The results suggest that the inefficiency estimates are substantially lower when the unobserved firm-specific effects are taken into account.

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Bibliographic Info

Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 31 (2009)
Issue (Month): 2 (March)
Pages: 306-315

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Handle: RePEc:eee:eneeco:v:31:y:2009:i:2:p:306-315

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Web page: http://www.elsevier.com/locate/eneco

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Keywords: Cost function Efficiency Panel data Multi-output utilities;

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References

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Citations

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Cited by:
  1. Filippini, Massimo & Wetzel, Heike, 2013. "The Impact of Ownership Unbundling on Cost Efficiency: Empirical Evidence from the New Zealand Electricity Distribution Sector," EWI Working Papers 2013-6, Energiewirtschaftliches Institut an der Universitaet zu Koeln.
  2. Goto, Mika & Sueyoshi, Toshiyuki, 2009. "Productivity growth and deregulation of Japanese electricity distribution," Energy Policy, Elsevier, vol. 37(8), pages 3130-3138, August.
  3. Assaf, A. George & Barros, Carlos Pestana & Managi, Shunsuke, 2011. "Cost efficiency of Japanese steam power generation companies: A Bayesian comparison of random and fixed frontier models," Applied Energy, Elsevier, vol. 88(4), pages 1441-1446, April.
  4. Carvalho, Pedro & Marques, Rui Cunha & Berg, Sanford, 2011. "A meta-regression analysis of benchmarking studies on water utilities market structure," MPRA Paper 32894, University Library of Munich, Germany.
  5. Anna Bottasso & Maurizio Conti & Massimiliano Piacenza & Davide Vannoni, 2010. "The Appropriateness of the Poolability Assumption for Multiproduct Technologies: Evidence from the English Water and Sewerage Utilities," Carlo Alberto Notebooks 183, Collegio Carlo Alberto.
  6. Mohsen Pourebadollahan Covich & Archana Aggarwal, 2010. "Reform and Efficiency: An Application to Iranian Regional Electricity Companies," Iranian Economic Review, Economics faculty of Tehran university, vol. 15(2), pages 83-104, spring.
  7. Massimo Filippini & Lester C Hunt & Jelena Zoric, 2013. "Impact of energy policy instruments on the estimated level of underlying energy efficiency in the EU residential sector," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 139, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
  8. Smith, Andrew S.J., 2012. "The application of stochastic frontier panel models in economic regulation: Experience from the European rail sector," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(2), pages 503-515.
  9. Capece, Guendalina & Cricelli, Livio & Di Pillo, Francesca & Levialdi, Nathan, 2010. "A cluster analysis study based on profitability and financial indicators in the Italian gas retail market," Energy Policy, Elsevier, vol. 38(7), pages 3394-3402, July.
  10. Kopsakangas-Savolainen, Maria & Svento, Rauli, 2011. "Observed and unobserved heterogeneity in stochastic frontier models: An application to the electricity distribution industry," Energy Economics, Elsevier, vol. 33(2), pages 304-310, March.
  11. Massimo Filippini & Martin Koller, 2012. "Cost Efficiency Measurement in Postal Delivery Networks," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 1206, USI Università della Svizzera italiana.
  12. Matthias Walter, 2011. "Some Determinants of Cost Efficiency in German Public Transport," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 45(1), pages 1-20, January.

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