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From Transition to Competition: Dynamic Efficiency Analysis of Polish Electricity Distribution Companies

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  • Astrid Cullmann
  • Christian von Hirschhausen

Abstract

In this paper we test the hypothesis that the economic transition toward a market economy increases the efficiency of firms. We study 32 Polish electricity distribution companies between 1997-2002, by applying common benchmarking methods to the panel: the nonparametric data envelopment analysis (DEA), the free disposal hull (FDH), and, as a parametric approach, the stochastic frontier analysis (SFA). We then measure and decompose productivity change with Malmquist indices. We find that the technical efficiency of the companies has indeed increased during the transition, while allocative efficiency has deteriorated. We also find significantly increasing returns to scale, suggesting that the regulatory authority should allow companies to merge into larger units.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.61927.de/dp716.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 716.

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Length: 39 p.
Date of creation: 2007
Date of revision:
Handle: RePEc:diw:diwwpp:dp716

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Keywords: Efficiency analysis; electricity distribution; transition; econometric methods; Poland; DEA; SFA;

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References

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  1. Paul W. Bauer & Allen N. Berger & Gary D. Ferrier & David B. Humphrey, 1997. "Consistency conditions for regulatory analysis of financial institutions: a comparison of frontier efficiency methods," Financial Services working paper, Federal Reserve Bank of Cleveland 97-02, Federal Reserve Bank of Cleveland.
  2. Mehdi Farsi & Massimo Filippini & Michael Kuenzle, 2006. "Cost Efficiency in Regional Bus Companies: An Application of Alternative Stochastic Frontier Models," Journal of Transport Economics and Policy, London School of Economics and University of Bath, London School of Economics and University of Bath, vol. 40(1), pages 95-118, January.
  3. von Hirschhausen, Christian R. & Cullmann, Astrid, 2005. "Efficiency Analysis of German Electricity Distribution Utilities : Non-Parametric and Parametric Tests," Dresden Discussion Paper Series in Economics, Dresden University of Technology, Faculty of Business and Economics, Department of Economics 06/05, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
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Cited by:
  1. Yu, W. & Jamasb, T. & Pollitt, M., 2007. "Incorporating the Price of Quality in Efficiency Analysis: the Case of Electricity Distribution Regulation in the UK," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 0736, Faculty of Economics, University of Cambridge.

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