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Dynamic Efficiency Estimation: An Application to US Electric Utilities

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The static production efficiency model and the dynamic duality model of intertemporal decision making using a parametric approach have been continuously developed but in separate direction. In this study the static shadow cost approach and the dynamic duality model of intertemporal decision making are integrated to formulate theoretical and econometric models of dynamic efficiency with intertemporal cost minimizing firm behavior. The dynamic efficiency model is empirically implemented using a panel data set of 72 U.S. major investor-owned electric utilities using fossil-fuel fired steam electric power generation during the time period of 1986 to 1999. The major results of this study are that most electric utilities in this study underutilized fuel relative to the aggregated labor and maintenance input and they overutilized capital in production. Electric utilities with relatively high technical inefficiency of variable inputs demand in production in states adopting a deregulation plan improve the performance of the utilities. The estimates of the input price elasticities present the substitution possibilities among the inputs. Finally, the results suggest evidence of increasing returns to scale in the production of the electricity industry.

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Paper provided by School of Economics, University of Queensland, Australia in its series CEPA Working Papers Series with number WP052003.

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Date of creation: Jul 2003
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Handle: RePEc:qld:uqcepa:05

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  14. Epstein, Larry G & Denny, Michael G S, 1983. "The Multivariate Flexible Accelerator Model: Its Empirical Restrictions and an Application to U.S. Manufacturing," Econometrica, Econometric Society, vol. 51(3), pages 647-74, May.
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Citations

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Cited by:
  1. Stefanou, Spiro E., 2009. "A Dynamic Characterization of Efficiency," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 10(1), January.
  2. Kapelko, Magdalena & Oude Lansink, Alfons G.J.M. & Stefanou, Spiro E., 2012. "Assessing dynamic efficiency of the Spanish construction sector pre- and post-financial crisis," 131st Seminar, September 18-19, 2012, Prague, Czech Republic 135790, European Association of Agricultural Economists.
  3. Sifis Kafkalas & Pantelis Kalaitzidakis & Vangelis Tzouvelekas, 2012. "Tax Evasion and Public Expenditures on Tax Collection Services in an Endogenous Growth Model," Working Papers 1202, University of Crete, Department of Economics, revised 09 Mar 2013.
  4. Supawat Rungsuriyawiboon & Tim Coelli, 2004. "Regulatory Reform and Economic Performance in US Electricity Generation," CEPA Working Papers Series WP062004, School of Economics, University of Queensland, Australia.
  5. Supawat Rungsuriyawiboon & Spiro Stefanou, 2008. "The dynamics of efficiency and productivity growth in U.S. electric utilities," Journal of Productivity Analysis, Springer, vol. 30(3), pages 177-190, December.
  6. Grigorios Emvalomatis, 2012. "Adjustment and unobserved heterogeneity in dynamic stochastic frontier models," Journal of Productivity Analysis, Springer, vol. 37(1), pages 7-16, February.
  7. Stratford Douglas & Thomas A. Garrett & Russell M. Rhine, 2009. "Disallowances and overcapitalization in the U.S. electric utility industry," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 23-32.
  8. Subal Kumbhakar & Kai Sun, 2012. "Estimation of TFP growth: a semiparametric smooth coefficient approach," Empirical Economics, Springer, vol. 43(1), pages 1-24, August.
  9. Margarita Genius & Spyro Stefanou & Vangelis Tzouvelekas, 2009. "Productivity Growth and Efficiency under Leontief Technology: An Application to US Steam-Electric Power Generation Utilities," Working Papers 0913, University of Crete, Department of Economics.
  10. Supawat Rungsuriyawiboon & Chris O'Donnell, 2004. "Curvature-Constrained Estimates of Technical Efficiency and Returns to Scale for U.S. Electric Utilities," CEPA Working Papers Series WP072004, School of Economics, University of Queensland, Australia.
  11. Huettel, Silke & Narayana, Rashmi & Odening, Martin, 2011. "Measuring dynamic efficiency under uncertainty," Structural Change in Agriculture/Strukturwandel im Agrarsektor (SiAg) Working Papers 129062, Humboldt University Berlin, Department of Agricultural Economics.
  12. Wagner, Christina & Huttel, Silke & Odening, Martin, 2012. "Dynamic Efficiency Under Uncertainty: An Application To German Dairy Farms," 52nd Annual Conference, Stuttgart, Germany, September 26-28, 2012 133826, German Association of Agricultural Economists (GEWISOLA).
  13. Supawat Rungsuriyawiboon, 2004. "An Analysis of Cost Structures in the Electricity Generation Industry," CEPA Working Papers Series WP052004, School of Economics, University of Queensland, Australia.
  14. Kapelko, Magdalena & Oude Lansink, Alfons G.J.M. & Stefanou, Spiro E., 2012. "Dynamic Productivity Growth in the Spanish Meat Industry," 131st Seminar, September 18-19, 2012, Prague, Czech Republic 135789, European Association of Agricultural Economists.
  15. Ovtchinnikov, Alexei V., 2013. "Merger waves following industry deregulation," Journal of Corporate Finance, Elsevier, vol. 21(C), pages 51-76.
  16. Genius, Margarita & Stefanou, Spiro E. & Tzouvelekas, Vangelis, 2012. "Measuring productivity growth under factor non-substitution: An application to US steam-electric power generation utilities," European Journal of Operational Research, Elsevier, vol. 220(3), pages 844-852.

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