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Reform and Efficiency: An Application to Iranian Regional Electricity Companies

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  • Mohsen Pourebadollahan Covich

    (Department of Economics, Faculty of Social Sciences and Humanities, University of Tabriz, Tabriz, Iran)

  • Archana Aggarwal

    (Center for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi, India)

Abstract

The electricity in Iran, like many other countries, has undergone a reform. This reform which separated the distribution sector from the regional electricity companies took place in 1993. The main objective of this paper is to analyze the cost structure of Iranian regional electricity companies with respect to scale and cost efficiency, in order to evaluate the changes in the performance of these companies through the reform. To that end, a translog average cost function was estimated for a panel of 16 Iranian regional electricity companies over the period 1989–1990 to 2002–2003, using the time–varying cost efficiency frontier model suggested by Cornwell, Schmidt and Sickles (1990). The results indicate the existence of economies of scale pre and post–reform for all companies; however, it is more evident after the reform. In addition, the findings on cost efficiency show that most of these companies were suffering from the low efficiency, and the reform has improved the efficiency of the majority of companies.

Suggested Citation

  • Mohsen Pourebadollahan Covich & Archana Aggarwal, 2010. "Reform and Efficiency: An Application to Iranian Regional Electricity Companies," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 15(2), pages 83-104, spring.
    • Handle: RePEc:eut:journl:v:15:y:2010:i:2:p:83
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    References listed on IDEAS

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