‘Comparing Brazil and USA electricity performance; what was the impact of privatisation?’
AbstractBeginning in 1995 a large proportion of the Brazilian electricity distribution sector went through privatisation and restructuring, whereas privately-owned U.S. utilities did not suffer similar ownership change process. This paper is an empirical assessment of the efficiency of the Brazilian distribution sector relative to its U.S. counterpart in 1994 and 2000. Two techniques are applied: Data Envelopment Analysis (DEA), including the computation of Malmquist indices of productivity growth, and Stochastic Frontier Analysis (SFA). For the models that use operating costs as input, we find a positive but not statistically significant impact of Brazilian privatisation on technical efficiency. For the models that use total costs, the impact is significantly negative. Although this should be taken with caution, the negative impact can be the result of an investment surge after privatisation or of an increased rate of substitution of capital for labour in the Brazilian distribution sector. These results suggest that capital costs should not be excluded from the benchmarking. The findings also highlight the importance of establishing standard measures of capital costs for international benchmarking and incentive based regulation.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0423.
Date of creation: Apr 2004
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benchmarking; international comparison; technical efficiency; Data Envelopment Analysis; Stochastic Frontier Analysis; Malmquist Productivity Index; electricity distribution systems;
Find related papers by JEL classification:
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-04-18 (All new papers)
- NEP-COM-2004-04-18 (Industrial Competition)
- NEP-ENE-2004-04-18 (Energy Economics)
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