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

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Author Info
Astrid Cullmann
Christian von Hirschhausen

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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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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
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Publication status: Published in: Economics of Transition 16 (2008) 2, 335-357
Handle: RePEc:diw:diwwpp:dp716

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

Find related papers by JEL classification:
P31 - Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Jones, Derek & Klinedinst, Mark & Rock, Charles, 1998. "Productive Efficiency during Transition: Evidence from Bulgarian Panel Data," Journal of Comparative Economics, Elsevier, vol. 26(3), pages 446-464, September. [Downloadable!] (restricted)
  2. Christian von Hirschhausen & Astrid Cullmann & Andreas Kappeler, 2006. "Efficiency analysis of German electricity distribution utilities -- non-parametric and parametric tests," Applied Economics, Taylor and Francis Journals, vol. 38(21), pages 2553-2566, December. [Downloadable!] (restricted)
  3. William Greene, 2002. "Fixed and Random Effects in Stochastic Frontier Models," Working Papers 02-16, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
  4. Jon Stern & Junior R. Davis, 1998. "Economic reform of the electricity industries of Central and Eastern Europe," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 6(2), pages 427-460, November. [Downloadable!] (restricted)
    Other versions:
  5. Cazals, Catherine & Florens, Jean-Pierre & Simar, Leopold, 2002. "Nonparametric frontier estimation: a robust approach," Journal of Econometrics, Elsevier, vol. 106(1), pages 1-25, January. [Downloadable!] (restricted)
  6. Koop, Gary & Osiewalski, Jacek & Steel, Mark F J, 2000. " A Stochastic Frontier Analysis of Output Level and Growth in Poland and Western Economies," Economic Change and Restructuring, Springer, vol. 33(3), pages 185-202. [Downloadable!] (restricted)
    Other versions:
  7. Jamasb, T. & Pollitt, M., 2000. "Benchmarking and regulation: international electricity experience," Utilities Policy, Elsevier, vol. 9(3), pages 107-130, September. [Downloadable!] (restricted)
  8. David M. Newbery, 1994. "Restructuring and privatizing electric utilities in Eastern Europe," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 2(3), pages 291-316, 09. [Downloadable!] (restricted)
  9. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  10. Jon Stern, 1994. "Economic regulation in Central and Eastern Europe 1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 2(3), pages 391-398, 09. [Downloadable!] (restricted)
  11. Brada, Josef C & King, Arthur E & Ma, Chia Ying, 1997. "Industrial Economics of the Transition: Determinants of Enterprise Efficiency in Czechoslovakia and Hungary," Oxford Economic Papers, Oxford University Press, vol. 49(1), pages 104-27, January. [Downloadable!] (restricted)
  12. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July. [Downloadable!] (restricted)
  13. David C. Wheelock & Paul Wilson, 2003. "Robust nonparametric estimation of efficiency and technical change in U.S. commercial banking," Working Papers 2003-037, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
  14. Wilson, Paul W, 1993. "Detecting Outliers in Deterministic Nonparametric Frontier Models with Multiple Outputs," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(3), pages 319-23, July.
  15. László Halpern & Gábor Körösi, 2001. "Efficiency and market share in the Hungarian corporate sector," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(3), pages 559-592, November. [Downloadable!] (restricted)
    Other versions:
  16. Mehdi Farsi & Massimo Filippini, 2004. "Regulation and Measuring Cost-Efficiency with Panel Data Models: Application to Electricity Distribution Utilities," Review of Industrial Organization, Springer, vol. 25(1), pages 1-19, 08. [Downloadable!]
  17. 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," Finance and Economics Discussion Series 1997-50, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  18. Piesse, Jenifer & Thirtle, Colin, 2000. "A Stochastic Frontier Approach to Firm Level Efficiency, Technological Change, and Productivity during the Early Transition in Hungary," Journal of Comparative Economics, Elsevier, vol. 28(3), pages 473-501, September. [Downloadable!] (restricted)
  19. Antonio Estache & MartÌn A. Rossi & Christian A. Ruzzier, 2004. "The Case for International Coordination of Electricity Regulation: Evidence from the Measurement of Efficiency in South America," Journal of Regulatory Economics, Springer, vol. 25(3), pages 271-295, 05. [Downloadable!]
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  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 0736, Faculty of Economics, University of Cambridge. [Downloadable!]
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