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

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Author Info
Mehdi Farsi
Massimo Filippini () (Center for Energy Policy and Economics, Federal Institute of Technology, University of Lugano, ETH Zentrum, WEC, 8092 Zurich, Switzerland; Department of Economics, University of Lugano, Via Ospedale 13, 6900 Lugano, Switzerland; CEPE, ETH Zentrum, CH-8092, Zurich, Switzerland. Tel: +41-1-632-0649; Fax: +41-1-632-1050)

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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.

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Publisher Info
Article provided by Springer in its journal Review of Industrial Organization.

Volume (Year): 25 (2004)
Issue (Month): 1 (08)
Pages: 1-19
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Handle: RePEc:kap:revind:v:25:y:2004:i:1:p:1-19

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  1. Massimo Filippini & Marika Zola, 2005. "Economies of scale and cost efficiency in the postal services: empirical evidence from Switzerland," Applied Economics Letters, Taylor and Francis Journals, vol. 12(7), pages 437-441, June. [Downloadable!] (restricted)
  2. Jamasb, T. & Pollitt, M.G. & Triebs, T., 2008. "Productivity and Efficiency of US Gas Transmission Companies: A European Regulatory Perspective," Cambridge Working Papers in Economics 0812, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  3. Ayako Suzuki, 2008. "Yardstick Competition to Elicit Private Information: An Empirical Analysis of the Japanese Gas Distribution Industry," ISER Discussion Paper 0709, Institute of Social and Economic Research, Osaka University. [Downloadable!]
  4. Astrid Cullmann & Christian von Hirschhausen, 2007. "From Transition to Competition: Dynamic Efficiency Analysis of Polish Electricity Distribution Companies," Discussion Papers of DIW Berlin 716, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  5. Hailu, Getu & Goddard, Ellen & Jeffrey, Scott, 2005. "Measuring Efficiency in Fruit and Vegetable Marketing Co-operatives with Heterogeneous Technologies in Canada," 2005 Annual meeting, July 24-27, Providence, RI 19507, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  6. Carlos Pestana Barros, 2008. "Identification of Segments of Thermo Energy Plants with a Latent Class Model," Working Papers 2008/11, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon.. [Downloadable!]
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  7. Christian von Hirschhausen & Astrid Cullmann & Andreas Kappeler, 2006. "Efficiency analysis of German electricity distribution utilities -- non-parametric and parametric tests," Applied Economics, Taylor and Francis Journals, vol. 38(21), pages 2553-2566, December. [Downloadable!] (restricted)
  8. Chen Lin & Sanford Berg, 2008. "Incorporating Service Quality into Yardstick Regulation: An Application to the Peru Water Sector," Review of Industrial Organization, Springer, vol. 32(1), pages 53-75, February. [Downloadable!] (restricted)
  9. Astrid Cullmann & Hélène Crespo & Marie-Anne Plagnet, 2008. "International Benchmarking in Electricity Distribution: A Comparison of French and German Utilities," Discussion Papers of DIW Berlin 830, DIW Berlin, German Institute for Economic Research. [Downloadable!]
  10. Mehdi Farsi, 2008. "The temporal variation of cost-efficiency in Switzerland’s hospitals: an application of mixed models," Journal of Productivity Analysis, Springer, vol. 30(2), pages 155-168, October. [Downloadable!] (restricted)
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