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Distributional effects of liberalising UK residential utility markets

Author

Listed:
  • Catherine Waddams
  • Ruth Hancock

Abstract

Competition is being extended into residential utility markets world-wide; the European directives on telecoms, electricity and gas will extend choice throughout the European Union by the turn of the century. In the UK, the Privatisation Acts not only changed the ownership of utilities, but imposed a duty on the regulators to encourage competition. It is the introduction of competition,actual and potential, that has been the main force behind changing the relative prices charged to different consumers, particularly in the residential market. We use household-level data to identify the distributional impact, particularly on vulnerable households and those for whom regulators have special responsibilities. We find a mixed outcome, with some vulnerable households, especially pensioners, adversely affected; we suggest potential compensation mechanisms that could improve welfare by enabling the benefits of competition in these industries supplying essential services to be gained without harming the most vulnerable households.

Suggested Citation

  • Catherine Waddams & Ruth Hancock, 1998. "Distributional effects of liberalising UK residential utility markets," Fiscal Studies, Institute for Fiscal Studies, vol. 19(3), pages 295-319, August.
    • Handle: RePEc:ifs:fistud:v:19:y:1998:i:3:p:295-319
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    File URL: http://www.ifs.org.uk/fs/articles/waddams_aug98.pdf
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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