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Costly Gains to Breaking Up: LECs and the Baby Bells

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  • Ying, John S
  • Shin, Richard T

Abstract

While the divestiture of AT&T was intended to produce benefits in the long-distance market, the evidence suggests it has created an unexpected side benefit in local telephone markets. The authors' results show that local exchange carriers have realized immediate cost savings in responding to competitive pressures since the breakup, with the baby Bells experiencing generally larger gains. Dynamically, these productivity gains have increased over time at a relatively constant rate. Although gains of 3-5 percent of total cost are not that large, the absolutely large costs of telephone companies imply significant cost savings of nearly $72 million for the representative firm. Copyright 1993 by MIT Press.

Suggested Citation

  • Ying, John S & Shin, Richard T, 1993. "Costly Gains to Breaking Up: LECs and the Baby Bells," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 357-361, May.
  • Handle: RePEc:tpr:restat:v:75:y:1993:i:2:p:357-61
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    Cited by:

    1. Resende, Marcelo, 2008. "Efficiency measurement and regulation in US telecommunications: A robustness analysis," International Journal of Production Economics, Elsevier, vol. 114(1), pages 205-218, July.
    2. Noel Uri, 2002. "Assessing the Effect of Incentive Regulation on Productive Efficiency in Telecommunications in the United States," European Journal of Law and Economics, Springer, vol. 13(2), pages 113-127, March.
    3. Noel Uri, 2001. "Telecommunications in the United States and Changing Productive Efficiency," Journal of Industry, Competition and Trade, Springer, vol. 1(3), pages 321-335, September.
    4. Halkos, George & Tzeremes, Nickolaos, 2011. "A conditional full frontier approach for investigating the Averch-Johnson effect," MPRA Paper 35491, University Library of Munich, Germany.
    5. Lien, Donald & Peng, Yan, 2001. "Competition and production efficiency: Telecommunications in OECD countries," Information Economics and Policy, Elsevier, vol. 13(1), pages 51-76, March.
    6. Uri, Noel D., 2001. "Technical efficiency, allocative efficiency, and the impact of incentive regulation in telecommunications in the United States," Structural Change and Economic Dynamics, Elsevier, vol. 12(1), pages 59-73, March.
    7. Segendorff, Björn, 1995. "The Telecommunication Market: A Survey of Theory and Empirics," Working Paper Series 442, Research Institute of Industrial Economics.
    8. Krouse, Clement G, et al, 1999. "The Bell System Divestiture/Deregulation and the Efficiency of the Operating Companies," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 61-87, April.
    9. Luigi Benfratello & Alberto Iozzi & Paola Valbonesi, 2009. "Technology and incentive regulation in the Italian motorways industry," Journal of Regulatory Economics, Springer, vol. 35(2), pages 201-221, April.
    10. Noel Uri, 2003. "The Effect of Incentive Regulation in Telecommunications in the United States," Quality & Quantity: International Journal of Methodology, Springer, vol. 37(2), pages 169-191, May.
    11. Kjell Salvanes & Sigve Tjøtta, 1998. "A Note on the Importance of Testing for Regularities for Estimated Flexible Functional Forms," Journal of Productivity Analysis, Springer, vol. 9(2), pages 133-143, March.
    12. Resende, Marcelo, 1999. "Productivity growth and regulation in U.S. local telephony," Information Economics and Policy, Elsevier, vol. 11(1), pages 23-44, March.
    13. Uri, Noel D., 2003. "The adoption of incentive regulation and its effect on technical efficiency in telecommunications in the United States," International Journal of Production Economics, Elsevier, vol. 86(1), pages 21-34, October.
    14. Noel Uri & Florence Setzer, 2003. "Assessing the Performance of the Price Cap Plan for Local Exchange Carriers in the United States," European Journal of Law and Economics, Springer, vol. 15(3), pages 263-276, May.
    15. Noel D. Uri, 2001. "Technical Efficiency, Allocative Efficiency, and the Implementation of a Price Cap Plan in Telecommunications in the United States," Journal of Applied Economics, Universidad del CEMA, vol. 4, pages 163-186, May.
    16. Noel Uri, 2001. "Productivity Change, Technical Progress, and Efficiency Improvement in Telecommunications," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 18(3), pages 283-300, May.
    17. Uri, Noel D., 2001. "Changing productive efficiency in telecommunications in the United States," International Journal of Production Economics, Elsevier, vol. 72(2), pages 121-137, July.
    18. Uri, Noel D., 2001. "The effect of incentive regulation on productive efficiency in telecommunications," Journal of Policy Modeling, Elsevier, vol. 23(8), pages 825-846, November.

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