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Regulation and Welfare: Assessing the Regulation of Electricity and Water Supply Utilities in Colombia During the 1990s. The Case of Empresas Públicas de Medellín

Author

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  • Luis Vélez
  • Andrés Ramírez
  • Liz Londoño
  • Yudy Giraldo
  • Daniel Londoño

Abstract

Public utilities reforms in the nineties introduced institutional and methodological changes in the price regulation of electricity and water supply utilities in Colombia. This paper, in addition to outlining these changes, evaluates welfare effects through a counterfactual scenario and the measurement of equivalent variation. With the counterfactual, we analyze how prices would have evolved had reforms not been made, while the equivalent variation assesses the impact of reforms on consumers’ welfare. To calculate the equivalent variation, an Almost Ideal Demand System is first estimated to obtain price and expenditure elasticities. In general, we conclude that regulation led to a consumer welfare loss.

Suggested Citation

  • Luis Vélez & Andrés Ramírez & Liz Londoño & Yudy Giraldo & Daniel Londoño, 2011. "Regulation and Welfare: Assessing the Regulation of Electricity and Water Supply Utilities in Colombia During the 1990s. The Case of Empresas Públicas de Medellín," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 74, pages 231-270.
  • Handle: RePEc:lde:journl:y:2011:i:74:p:231-270
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    More about this item

    Keywords

    regulation; public utilities; counterfactual analysis; elasticities; equivalent variation;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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