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The Productivity Puzzle in Network Industries: Evidence from the Energy Sector

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Listed:
  • Victor Ajayi

    (EPRG, CJBS, University of Cambridge)

  • Geoffroy Dolphin

    (EPRG, CJBS, University of Cambridge)

  • Karim Anaya

    (EPRG, CJBS, University of Cambridge)

  • Michael Pollitt

    (EPRG, CJBS, University of Cambridge)

Abstract

What accounts for the recent widespread slowdown in the productivity in advanced economies has remained a puzzle. One plausible explanation has been attributable to regulation, particularly anti-competitive regulations and environmental regulations. This paper focuses on the regulated energy network sectors by undertaking three sets of analysis in examining TFP in a sample of OECD countries over the period 1995-2016. First, using the growth accounting method, we find that there is a substantial productivity puzzle for the electricity and gas sectors, which exhibits a lower TFP growth than the whole economy over the period, and falls postfinancial crisis. Second, we identify the impact of regulation on productivity using a panel regression analysis. Our findings indicate that TFP levels seem weakly explained by changes to the competitive environment of the energy sector. Third, we show that energy and climate policy has negatively and significantly reduced energy sector productivity, at the same time as increasing capital input to the sector. We also find that the strength of energy and climate policy is positively correlated with lower aggregate TFP growth.
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Suggested Citation

  • Victor Ajayi & Geoffroy Dolphin & Karim Anaya & Michael Pollitt, 2020. "The Productivity Puzzle in Network Industries: Evidence from the Energy Sector," Working Papers EPRG2021, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg2021
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    Cited by:

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    2. Ryota Nakatani, 2023. "Productivity drivers of infrastructure companies: Network industries utilizing economies of scale in the digital era," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 94(4), pages 1273-1298, December.
    3. Vu, Khuong & Hartley, Kris, 2022. "Effects of digital transformation on electricity sector growth and productivity: A study of thirteen industrialized economies," Utilities Policy, Elsevier, vol. 74(C).
    4. Ajayi, V. & Pollitt, M .G., 2022. "Green growth and net zero policy in the UK: some conceptual and measurement issues," Cambridge Working Papers in Economics 2255, Faculty of Economics, University of Cambridge.

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    More about this item

    Keywords

    Total factor productivity; growth accounting; regulation; energy networks; climate policy;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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