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A cross-country analysis of electricity market reforms: Potential contribution of New Institutional Economics

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  • Erdogdu, Erkan

Abstract

The paper explores whether the question of why some countries are able to implement more extensive reforms is closely related to the question of why some countries have better institutions than others. We analyze this question by using an empirical econometric model based on Poisson regression with cross-section data covering 51 states in the US, 13 provinces in Canada and 51 other countries. In the course of the study, we check the validity of three important arguments of New Institutional Economics (NIE) for the power market liberalization process. The first argument is the "path-dependency". To test its impact on the reform progress, we try to explain whether the background of the chairperson of the regulatory agency when reforms started or that of the governor/minister responsible for energy policy at that time has an impact on the subsequent reform progress. The second argument is the impact of "democracy" as an institution on the reform progress. We look at the effect of two important indicators of democracy (i.e., civil liberties and political rights) on the reform progress. The final argument of NIE is about transaction costs. We concentrate on the level of corruption in a country as one of the key factors that determine transaction costs and try to explore its impact on the reforms. The results show that the backgrounds of the chairperson and the minister/governor, the level of democracy and corruption in a country are significantly correlated with how far reforms have gone in that country. The negative relationship between reform progress and civil liberties may indicate that reforms may be limited in democratic countries with strong civil society institutions such as trade unions or other organized structures in the society that may consider reforms as 'harmful' to their self-interest.

Suggested Citation

  • Erdogdu, Erkan, 2013. "A cross-country analysis of electricity market reforms: Potential contribution of New Institutional Economics," MPRA Paper 47496, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:47496
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    Cited by:

    1. Nepal, Rabindra & Menezes, Flavio & Jamasb, Tooraj, 2014. "Network regulation and regulatory institutional reform: Revisiting the case of Australia," Energy Policy, Elsevier, vol. 73(C), pages 259-268.
    2. Iweta Opolska, 2016. "Liberalisation of the gas industry in Europe.Does the European Union support efficacious regulatory solutions?," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 44.
    3. Erdogdu, Erkan, 2016. "Asymmetric volatility in European day-ahead power markets: A comparative microeconomic analysis," Energy Economics, Elsevier, vol. 56(C), pages 398-409.
    4. Kabir Malik, Maureen Cropper, Alexander Limonov and Anoop Singh, 2015. "The Impact of Electricity Sector Restructuring on Coal-fired Power Plants in India," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    5. Antonio Estache & Stéphane Saussier, 2014. "Public-Private Partnerships and Efficiency: A Short Assessment," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(3), pages 08-13, October.
    6. Jamasb, Tooraj & Llorca, Manuel & Khetrapal, Pavan & Thakur, Tripta, 2018. "Institutions and Performance of Regulated Firms: Evidence from Electric Utilities in the Indian States," Efficiency Series Papers 2018/03, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    7. repec:eco:journ2:2017-03-02 is not listed on IDEAS
    8. repec:ces:ifodic:v:12:y:2014:i:3:p:19126463 is not listed on IDEAS

    More about this item

    Keywords

    Econometric modeling; Institutions and the macroeconomy; International economics; Electric utilities;

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • F5 - International Economics - - International Relations, National Security, and International Political Economy
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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