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Scale economies in electricity distribution: a semiparametric analysis

  • A. Yatchew

    (Department of Economics, University of Toronto, 150 St George Street, Toronto, Canada M5S 3G7)

We estimate the costs of distributing electricity using data on municipal electric utilities in Ontario, Canada for the period 1993-5. The data reveal substantial evidence of increasing returns to scale with minimum efficient scale being achieved by firms with about 20,000 customers. Larger firms exhibit constant or decreasing returns. Utilities which deliver additional services (such as water|sewage), have significantly lower costs, indicating the presence of economies of scope. Our basic specifications comprise semiparametric variants of the translog cost function where output enters non-parametrically and remaining variables (including their interactions with output) are parametric. We rely upon non-parametric differencing techniques and extend a previous differencing test of equality of non-parametric regression functions to a panel data setting. Copyright © 2000 John Wiley & Sons, Ltd.Journal: Journal of Applied Econometrics

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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 15 (2000)
Issue (Month): 2 ()
Pages: 187-210

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Handle: RePEc:jae:japmet:v:15:y:2000:i:2:p:187-210
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  1. Hjalmarsson, Lennart & Veiderpass, Ann, 1992. " Productivity in Swedish Electricity Retail Distribution," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(0), pages S193-205, Supplemen.
  2. Dennis Cox & Eunmee Koh, 1989. "A smoothing spline based test of model adequacy in polynomial regression," Annals of the Institute of Statistical Mathematics, Springer, vol. 41(2), pages 383-400, June.
  3. Kjell G. Salvanes & Sigve Tjøtta, 1998. "A Test for Natural Monopoly with Application to Norwegian Electricity Distribution," Review of Industrial Organization, Springer, vol. 13(6), pages 669-685, December.
  4. Ahn, Hyungtaik & Powell, James L., 1993. "Semiparametric estimation of censored selection models with a nonparametric selection mechanism," Journal of Econometrics, Elsevier, vol. 58(1-2), pages 3-29, July.
  5. Nelson, Randy A., 1990. "The effects of competition on publicly-owned firms : Evidence from the municipal electric industry in the U.S," International Journal of Industrial Organization, Elsevier, vol. 8(1), pages 37-51.
  6. Adonis Yatchew, 1998. "Nonparametric Regression Techniques in Economics," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 669-721, June.
  7. Yatchew, A., 1999. "An elementary nonparametric differencing test of equality of regression functions," Economics Letters, Elsevier, vol. 62(3), pages 271-278, March.
  8. Baltagi, Badi H. & Hidalgo, Javier & Li, Qi, 1996. "A nonparametric test for poolability using panel data," Journal of Econometrics, Elsevier, vol. 75(2), pages 345-367, December.
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