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The impact of incentive regulation on productivity in the US telecommunications industry: A stochastic frontier approach

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  • Seo, Daigyo
  • Shin, Jonghyup

Abstract

This paper investigates whether the substitution of price cap regulation (PCR) and other forms of incentive regulation for traditional rate of return regulation (RRR) has had a measurable effect on productivity growth in the US telecommunications industry. A stochastic frontier approach is employed to compute the efficiency change, technological progress, and productivity growth for 25 LECs over the 1988-1998 time periods. By examining the relationship between the change in productivity growth and regulatory regime variables and other control variables, we find that PCR has a significant and positive effect, both in contemporaneous and lagged specifications.

Suggested Citation

  • Seo, Daigyo & Shin, Jonghyup, 2011. "The impact of incentive regulation on productivity in the US telecommunications industry: A stochastic frontier approach," Information Economics and Policy, Elsevier, vol. 23(1), pages 3-11, March.
  • Handle: RePEc:eee:iepoli:v:23:y:2011:i:1:p:3-11
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    References listed on IDEAS

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    1. Majumdar, Sumit K, 1997. "Incentive Regulation and Productive Efficiency in the U.S. Telecommunications Industry," The Journal of Business, University of Chicago Press, vol. 70(4), pages 547-576, October.
    2. Weisman, Dennis L, 1993. "Superior Regulatory Regimes in Theory and Practice," Journal of Regulatory Economics, Springer, vol. 5(4), pages 355-366, December.
    3. Catherine J. Morrison Paul & Warren E. Johnston & Gerald A. G. Frengley, 2000. "Efficiency in New Zealand Sheep and Beef Farming: The Impacts of Regulatory Reform," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 325-337, May.
    4. Resende, Marcelo, 1999. "Productivity growth and regulation in U.S. local telephony," Information Economics and Policy, Elsevier, vol. 11(1), pages 23-44, March.
    5. Ai, Chunrong & Sappington, David E M, 2002. "The Impact of State Incentive Regulation on the U.S. Telecommunications Industry," Journal of Regulatory Economics, Springer, vol. 22(2), pages 133-159, September.
    6. Noel D. Uri, 2002. "Measuring the change in productive efficiency in telecommunications in the USA," Journal of Economic Studies, Emerald Group Publishing, vol. 29(2), pages 151-167, May.
    7. Kridel, Donald J & Sappington, David E M & Weisman, Dennis L, 1996. "The Effects of Incentive Regulation in the Telecommunications Industry: A Survey," Journal of Regulatory Economics, Springer, vol. 9(3), pages 269-306, May.
    8. Resende, Marcelo, 2000. "Regulatory Regimes and Efficiency in US Local Telephony," Oxford Economic Papers, Oxford University Press, vol. 52(3), pages 447-470, July.
    9. Tim Coelli & Sergio Perelman, 2000. "Technical efficiency of European railways: a distance function approach," Applied Economics, Taylor & Francis Journals, vol. 32(15), pages 1967-1976.
    10. Noel Uri, 2001. "Productivity Change, Technical Progress, and Efficiency Improvement in Telecommunications," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 18(3), pages 283-300, May.
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    Cited by:

    1. Hellwig, Michael & Schober, Dominik & Cabral, Luís M. B., 2018. "Incentive regulation: Evidence from German electricity networks," ZEW Discussion Papers 18-010, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    2. Çelen, Aydın & Yalçın, Neşe, 2012. "Performance assessment of Turkish electricity distribution utilities: An application of combined FAHP/TOPSIS/DEA methodology to incorporate quality of service," Utilities Policy, Elsevier, vol. 23(C), pages 59-71.
    3. Ben Dkhil, Inès, 2014. "Regulation and Investment in Telecom Network Infrastructure Facilities: The Recent Developments and Debates," MPRA Paper 72910, University Library of Munich, Germany, revised 02 Feb 2015.
    4. Ghosh, Ranjan & Kathuria, Vinish, 2016. "The effect of regulatory governance on efficiency of thermal power generation in India: A stochastic frontier analysis," Energy Policy, Elsevier, vol. 89(C), pages 11-24.
    5. Ben Dkhil, Inès, 2014. "Investment in Fixed Broadband Networks and Access Regulation in Developed and Developing countries: Panel Data Applications," MPRA Paper 59337, University Library of Munich, Germany.

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