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Scale economies in electricity distribution: a semiparametric analysis

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  • A. Yatchew

    (Department of Economics, University of Toronto, 150 St George Street, Toronto, Canada M5S 3G7)

Abstract

We estimate the costs of distributing electricity using data on municipal electric utilities in Ontario, Canada for the period 1993-5. The data reveal substantial evidence of increasing returns to scale with minimum efficient scale being achieved by firms with about 20,000 customers. Larger firms exhibit constant or decreasing returns. Utilities which deliver additional services (such as water|sewage), have significantly lower costs, indicating the presence of economies of scope. Our basic specifications comprise semiparametric variants of the translog cost function where output enters non-parametrically and remaining variables (including their interactions with output) are parametric. We rely upon non-parametric differencing techniques and extend a previous differencing test of equality of non-parametric regression functions to a panel data setting. Copyright © 2000 John Wiley & Sons, Ltd.Journal: Journal of Applied Econometrics

Suggested Citation

  • A. Yatchew, 2000. "Scale economies in electricity distribution: a semiparametric analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(2), pages 187-210.
    • Handle: RePEc:jae:japmet:v:15:y:2000:i:2:p:187-210
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    File URL: http://qed.econ.queensu.ca:80/jae/2000-v15.2/
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    References listed on IDEAS

    as
    1. Yatchew, A., 1999. "An elementary nonparametric differencing test of equality of regression functions," Economics Letters, Elsevier, vol. 62(3), pages 271-278, March.
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