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Measuring Economies of Vertical Integration in Network

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  • Arnaud Reynaud
  • Serge Garcia
  • Michel Moreaux

Abstract

This paper provides a framework that aims at distinguishing the technological economies of vertical integration from the vertical economies resulting from market imperfections. To illustrate our analyze, we use consistent panel data econometric methods to estimate cost functions on a sample of North-American water utilities. Contrary to what has been found for other network industries (electricity and gas for instance), we show that the economies of vertical integration are only significant for the smallest utilities

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File URL: http://repec.org/esNASM04/up.26360.1075133322.pdf
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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 184.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nasm04:184

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Keywords: Vertical integration; water network; cost function;

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  1. J. A. Hausman & W. E. Taylor, 1980. "Panel Data and Unobservable Individual Effects," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 255, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, Econometric Society, vol. 50(4), pages 1029-54, July.
  3. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers, C.E.P.R. Discussion Papers 70, C.E.P.R. Discussion Papers.
  4. Kaserman, David L & Mayo, John W, 1991. "The Measurement of Vertical Economies and the Efficient Structure of the Electric Utility Industry," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 39(5), pages 483-502, September.
  5. Hart, O. & Tirole, J., 1990. "Vertical Integration And Market Foreclosure," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 548, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Kwoka, John E., 2002. "Vertical economies in electric power: evidence on integration and its alternatives," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 20(5), pages 653-671, May.
  7. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
  8. Nemoto, Jiro & Goto, Mika, 2004. "Technological externalities and economies of vertical integration in the electric utility industry," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 22(1), pages 67-81, January.
  9. Serge Garcia & Alban Thomas, 2001. "The Structure of Municipal Water Supply Costs: Application to a Panel of French Local Communities," Journal of Productivity Analysis, Springer, Springer, vol. 16(1), pages 5-29, July.
  10. Cornwell, Christopher & Schmidt, Peter & Wyhowski, Donald, 1992. "Simultaneous equations and panel data," Journal of Econometrics, Elsevier, Elsevier, vol. 51(1-2), pages 151-181.
  11. Lee, Byung-Joo, 1995. "Separability Test for the Electricity Supply Industry," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 10(1), pages 49-60, Jan.-Marc.
  12. Breusch, Trevor S & Mizon, Grayham E & Schmidt, Peter, 1989. "Efficient Estimation Using Panel Data," Econometrica, Econometric Society, Econometric Society, vol. 57(3), pages 695-700, May.
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Cited by:
  1. Jorge Guardiola & Francisco González-Gómez & Miguel A. García-Rubio, 2008. "Is the time dimension really important in research into contracting out?," FEG Working Paper Series, Faculty of Economics and Business (University of Granada) 08/02, Faculty of Economics and Business (University of Granada).

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