Regulation and Efficiency in the Electric Utility Industry
AbstractRate-of-return regulation is a distinct feature of the public utility environment. More than ten years ago, it was argued that this form of regulation might induce utility companies to operate inefficiently. This, the "Averch-Johnson effect," in spite of being the subject of widespread discussion, has not been assessed through formal quantitative analysis. This paper attempts such an analysis and presents evidence on the existence of the "A-J effect" by investigating a cross section of electric power plants. The Averch-Johnson proposition is strongly confirmed. Estimates of the magnitude of the regulation-induced inefficiency are also provided.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal Bell Journal of Economics.
Volume (Year): 5 (1974)
Issue (Month): 1 (Spring)
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Web page: http://www.rje.org
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- Donald Vitaliano & Gregory Stella, 2009.
"A Frontier Approach to Testing the Averch-Johnson Hypothesis,"
International Journal of the Economics of Business,
Taylor & Francis Journals, vol. 16(3), pages 347-363.
- Donald F. Vitaliano & Gregory Stella, 2006. "A Frontier Approach to Testing the Averch-Johnson Hypothesis," Rensselaer Working Papers in Economics 0613, Rensselaer Polytechnic Institute, Department of Economics.
- Paroma Sanyal, 2005. "Powering a Green Progress: The Effect of Electricity Deregulation on Environmental Research," Industrial Organization 0504015, EconWPA.
- Meredith Fowlie, 2010. "Emissions Trading, Electricity Restructuring, and Investment in Pollution Abatement," American Economic Review, American Economic Association, vol. 100(3), pages 837-69, June.
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