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The Effect of Restructuring Electricity Distribution Systems on Firms' Persistent and Transient Efficiency: The Case of Germany

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  • Oleg Badunenko, Astrid Cullmann, Subal C. Kumbhakar, and Maria Nieswand

Abstract

We evaluate the efficiency of electricity distribution operators (DSOs) as providers of local public infrastructure. In particular, we consider two types of efficiency, i.e., short-term (transient) and long-term (persistent). We apply the recently developed four-component stochastic frontier model, which allows identifying determinants of the two types of efficiency, after controlling for firm heterogeneity and random noise, to a panel dataset of German DSOs observed during 2006ý2012. Those DSOs operating in the eastern parts of Germany have undergone a profound restructuring after the reunification in 1990. We find that this was beneficial for their efficiency as they perform, on average, better in terms of persistent efficiency than DSOs in West Germany. Both eastern and western DSOs perform similarly well in terms of transient efficiency, which is expected as the sector is highly regulated. As such, we provide new insights on identifying the nature and sources of public infrastructure productive inefficiency, which is relevant for public policies.

Suggested Citation

  • Oleg Badunenko, Astrid Cullmann, Subal C. Kumbhakar, and Maria Nieswand, 2021. "The Effect of Restructuring Electricity Distribution Systems on Firms' Persistent and Transient Efficiency: The Case of Germany," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    • Handle: RePEc:aen:journl:ej42-4-nieswan
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    Cited by:

    1. Andrew P. Barnes, 2023. "The role of family life‐cycle events on persistent and transient inefficiencies in less favoured areas," Journal of Agricultural Economics, Wiley Blackwell, vol. 74(1), pages 295-315, February.
    2. Just, Lisa & Wetzel, Heike, 2020. "Distributed Generation and Cost Efficiency of German Electricity Distribution Network Operators," EWI Working Papers 2020-9, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).

    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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