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Industry Restructuring, Mergers, And Efficiency: Evidence From Electric Power

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  • Kwoka, J.
  • Pollitt, M.

Abstract

This paper analyses the performance impact of the merger wave which took place in the US electricity industry during the period 1994-2003. It does so by analyzing the impact on operating and total cost in electricity distribution. While there are past studies of efficiency and productivity effects, as well as of prices, profits, and other outcomes, this study differs in several ways. First, the database consists of many merging and non-merging firms, rather than only a few on which to base inferences. Second, all of these mergers arise in a single industry, greatly facilitating controlled comparison. Third, we have data on the several years of pre-merger and post-merger efficiency of the specific merging units, unlike virtually all past studies. And finally, we employ a powerful nonparametric technique - data envelopment analysis - to measure the efficiency of each operating unit. The results indicate that electricity mergers are not consistent with improved cost performance.

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Bibliographic Info

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0725.

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Length: 29
Date of creation: May 2007
Date of revision:
Handle: RePEc:cam:camdae:0725

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Related research

Keywords: mergers; efficiency analysis; electricity distribution; data envelopment analysis.;

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References

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  1. Joskow, P.L., 2003. "The Difficult Transition to Competitive Electricity Markets in the U.S," Cambridge Working Papers in Economics 0328, Faculty of Economics, University of Cambridge.
  2. Jamasb, T. & Pollitt, M., 2000. "Benchmarking and regulation: international electricity experience," Utilities Policy, Elsevier, vol. 9(3), pages 107-130, September.
  3. repec:reg:wpaper:207 is not listed on IDEAS
  4. repec:reg:rpubli:207 is not listed on IDEAS
  5. Markiewicz, K. & Rose, N.L. & Wolfram, C., 2004. "Does Competition Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency," Cambridge Working Papers in Economics 0472, Faculty of Economics, University of Cambridge.
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Citations

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Cited by:
  1. Gaunt, C.T., 2008. "Electricity distribution industry restructuring in South Africa: A case study," Energy Policy, Elsevier, vol. 36(9), pages 3448-3459, September.
  2. Pollitt, M., 2007. "The arguments for and against ownership unbundling of energy transmission networks," Cambridge Working Papers in Economics 0737, Faculty of Economics, University of Cambridge.
  3. Francesc Trillas, 2008. "Regulatory federalism in network industries," Working Papers 2008/8, Institut d'Economia de Barcelona (IEB).
  4. Kristof De Witte & Elbert Dijkgraaf, 2007. "Mean and Bold?," Tinbergen Institute Discussion Papers 07-092/3, Tinbergen Institute.
  5. Kristof De Witte & Elbert Dijkgraaf, 2007. "Mean and Bold?," Tinbergen Institute Discussion Papers 07-092/3, Tinbergen Institute.

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