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A Note on Measuring the Productivity Offset for Regulatory Purposes

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  • Noel Uri

Abstract

Calculation of the productivity offset or the X-factor used in setting price caps has a fundamental flaw when it is based on conventional growth accounting total factor productivity analysis. The problem is discussed in the context of incentive regulation used by the Federal Communications Commission in the United States and the appropriate correction is indicated. An example of the problem and its correction, using the access charge for interstate service in telecommunications, is provided. The correction shows that the appropriate X-factor is 12 percent greater than that based on conventional growth accounting total factor productivity analysis. Copyright Kluwer Academic Publishers 2002

Suggested Citation

  • Noel Uri, 2002. "A Note on Measuring the Productivity Offset for Regulatory Purposes," Journal of Productivity Analysis, Springer, vol. 17(3), pages 201-211, May.
    • Handle: RePEc:kap:jproda:v:17:y:2002:i:3:p:201-211
    DOI: 10.1023/A:1015055904013
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    References listed on IDEAS

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    1. David Sappington, 1996. "Designing Incentive Regulation for the Telecommunications Industry," Books, American Enterprise Institute, number 52863, September.
    2. Sherman, Roger, 1992. "Capital Waste in the Rate-of-Return Regulated Firm," Journal of Regulatory Economics, Springer, vol. 4(2), pages 197-204, June.
    3. Berndt, Ernst R. & Fuss, Melvyn A., 1986. "Productivity measurement with adjustments for variations in capacity utilization and other forms of temporary equilibrium," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 7-29.
    4. Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, December.
    5. Crew, Michael A & Kleindorfer, Paul R, 1996. "Incentive Regulation in the United Kingdom and the United States: Some Lessons," Journal of Regulatory Economics, Springer, vol. 9(3), pages 211-225, May.
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