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Have consumers benefited from the reforms in the electricity distribution sector in Latin America?

  • Estache, Antonio
  • Rossi, Martin

The authors bring new empirical evidence on the impact of the choice of ownership and regulatory regime on firms'productivity and prices paid by consumers. They collect the evidence from a sample of electricity distribution companies in Latin America. The authors rely on estimations of labor and operation and maintenance (O&M) input requirement functions using alternative econometric approaches. Their main conclusions are: 1) Private firms perform better (approximately 30 percent) than public firms. 2) The regulatory regimes matter, so that price-cap regulated firms do better than rate-of-return regulated firms, and firms regulated under hybrid regimes have intermediate performance. 3) Private firms operating under rate of return are at most as efficient as public firms. 4) There is no clear pattern of differences in electricity prices according to the regulatory regime. 5) Final prices fell in general but the drop did not match the productivity gains, implying that the operators and the state share some of the gains in the form of rents and higher tax revenue, respectively.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3420.

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Date of creation: 01 Oct 2004
Date of revision:
Handle: RePEc:wbk:wbrwps:3420
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  1. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  2. 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, June.
  3. Ronald Fischer & Pablo Serra, 2000. "Regulating the Electricaly Sector in Latin America," Documentos de Trabajo 86, Centro de Economía Aplicada, Universidad de Chile.
  4. Kridel, Donald J & Sappington, David E M & Weisman, Dennis L, 1996. "The Effects of Incentive Regulation in the Telecommunications Industry: A Survey," Journal of Regulatory Economics, Springer, vol. 9(3), pages 269-306, May.
  5. Manuel Dussan, 1996. "Electric Power Sector Reform in Latin America and the Caribbean," IDB Publications (Working Papers) 46878, Inter-American Development Bank.
  6. Bagdadioglu, Necmiddin & Waddams Price, Catherine M. & Weyman-Jones, Thomas G., 1996. "Efficiency and ownership in electricity distribution: A non-parametric model of the Turkish experience," Energy Economics, Elsevier, vol. 18(1-2), pages 1-23, April.
  7. Battese, George E. & Corra, Greg S., 1977. "Estimation Of A Production Frontier Model: With Application To The Pastoral Zone Of Eastern Australia," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 21(03), December.
  8. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
  9. Kumbhakar, Subal C. & Hjalmarsson, Lennart, 1998. "Relative performance of public and private ownership under yardstick competition: electricity retail distribution," European Economic Review, Elsevier, vol. 42(1), pages 97-122, January.
  10. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-48, September.
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