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Size, density and costs of network services - the case of the distribution of electricity in Italy

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  • Oriana Caldera

  • Giuseppe Folloni

Abstract

The classical approach to the effects of territorial context in defining costs of distibution in network services (as the distribution of electric energy), often makes confusion between scale and density economies The consequence is a wrong definition of some variables and a misleading specification of the model. The result is a heavy underestimationf ot the role of the territorial context in shaping the curve of the average spatial cost of distribution. Both Cobb-Douglas and Translog functions are used to estimate the role of territorial characteristics in defining costs. We find, for the Italian case, that the share of cost due to a "non optimal territorial context" is about 40% on average (with a maximum of 68% in low density and scattered areas). There is a trade off between a policy equalizing spatial prices and a choice of minimize costs in central areas.

Suggested Citation

  • Oriana Caldera & Giuseppe Folloni, 2001. "Size, density and costs of network services - the case of the distribution of electricity in Italy," ERSA conference papers ersa01p211, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa01p211
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    References listed on IDEAS

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