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Heterogeneous effects of regulation on the efficiency of the electricity industry across European Union countries

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  • Pompei, Fabrizio

Abstract

This paper focuses on the relationship between the stringency of regulation (OECD indicators) and total factor productivity (TFP) growth in the electricity sectors of 19 European Union countries for the period 1994–2007. Both the OECD regulatory indicator and the TFP growth index have been decomposed in order to bring to light a complex picture of interrelations in which the negative impact of the overall regulation on productivity is the result of opposite forces. Estimation results tell us that only the stringency of entry regulation significantly reduces technological change, whereas vertical integration exhibits a negative and significant impact only on the catching up process (pure efficiency change). Lastly, we found an interesting result concerning the explanatory variables of the scale efficiency change: in this case only public ownership matters, in other terms high levels of public in the structure ownership of electric companies guarantee improvements in reaching the optimal scale of production. These heterogeneous effects are also confirmed when we use a different measure of efficiency, that is, the distance of the actual from the optimal reserve margin.

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  • Pompei, Fabrizio, 2013. "Heterogeneous effects of regulation on the efficiency of the electricity industry across European Union countries," Energy Economics, Elsevier, vol. 40(C), pages 569-585.
    • Handle: RePEc:eee:eneeco:v:40:y:2013:i:c:p:569-585
    DOI: 10.1016/j.eneco.2013.08.008
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    More about this item

    Keywords

    Electricity; Total factor productivity growth; Regulation;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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