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Cost Assessment of (Un)bundling: Separation of Vertically Integrated Public Utilities

In: Handbook of Production Economics

Author

Listed:
  • Pablo Arocena

    (Institute for Advanced Research in Business and Economics (INARBE))

  • Subal C. Kumbhakar

    (State University of New York at Binghamton
    Inland Norway University of Applied Sciences)

Abstract

In this chapter, we focus on the unbundling or separation of vertically integrated public utilities, which has been the cornerstone of competitive reforms in the utilities sector worldwide over the last 30 years. In particular, we provide a critical review of the empirical literature on economies of vertical integration in the electrical power industry. Estimates of scope economies across vertical stages have yielded somewhat mixed results in the electricity industry. Although the evidence remains ambiguous, some studies often report enormous differences in the estimates of the magnitude and significance of such economies, which is not helpful to policy makers. We identify several methodological issues in the empirical methods that have been employed, thereby identifying the challenges that future empirical research will need to address to provide improved estimates of economies of vertical integration.

Suggested Citation

  • Pablo Arocena & Subal C. Kumbhakar, 2022. "Cost Assessment of (Un)bundling: Separation of Vertically Integrated Public Utilities," Springer Books, in: Subhash C. Ray & Robert G. Chambers & Subal C. Kumbhakar (ed.), Handbook of Production Economics, chapter 45, pages 1751-1786, Springer.
    • Handle: RePEc:spr:sprchp:978-981-10-3455-8_47
    DOI: 10.1007/978-981-10-3455-8_47
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    More about this item

    Keywords

    Vertical integration; Electric utilities; Unbundling; Economies of scope; Cost estimation;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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