IDEAS home Printed from https://ideas.repec.org/a/kap/regeco/v46y2014i2p207-225.html
   My bibliography  Save this article

Ownership unbundling of natural gas transmission networks: empirical evidence

Author

Listed:
  • Christian Growitsch
  • Marcus Stronzik

Abstract

The European Commission has intensively examined the mandatory separation of natural gas transmission from production and services. However, economic theory is ambiguous on the price effects of vertical separation. In this paper, we empirically analyze the effect of ownership unbundling of gas transmission networks, considered to be the strongest form of vertical separation, on the level of end-user prices. Therefore, we apply different dynamic estimators such as system GMM and the bias-corrected least-squares dummy variable estimator to an unbalanced panel consisting of 18 EU countries over 19 years, allowing us to avoid the endogeneity problem and to estimate the long-run effects of regulation. We introduce a set of regulatory indicators as market entry regulation, ownership structure, vertical separation and market structure, as well as account for structural and economic country specifics. Among the different estimators, we consistently find that ownership unbundling has no impact on natural gas end-user prices, while the more modest legal unbundling reduces them significantly. Furthermore, third-party access, market structure and privatization show significant influence, with the latter leading to higher prices. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Christian Growitsch & Marcus Stronzik, 2014. "Ownership unbundling of natural gas transmission networks: empirical evidence," Journal of Regulatory Economics, Springer, vol. 46(2), pages 207-225, October.
    • Handle: RePEc:kap:regeco:v:46:y:2014:i:2:p:207-225
    DOI: 10.1007/s11149-014-9252-0
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11149-014-9252-0
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11149-014-9252-0?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hattori, Toru & Tsutsui, Miki, 2004. "Economic impact of regulatory reforms in the electricity supply industry: a panel data analysis for OECD countries," Energy Policy, Elsevier, vol. 32(6), pages 823-832, April.
    2. Lionel Nesta & Francesco Vona & Francesco Nicolli, 2012. "Environmental Policies, Product Market Regulation and Innovation in Renewable Energy," Working Papers 2012.90, Fondazione Eni Enrico Mattei.
    3. M. Florio & Rinaldo Brau & R. Doronzo, 2008. "Gas industry reforms and consumers' prices in the European Union," Working Paper CRENoS 200816, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    4. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    5. Yin-Fang Zhang & David Parker & Colin Kirkpatrick, 2008. "Electricity sector reform in developing countries: an econometric assessment of the effects of privatization, competition and regulation," Journal of Regulatory Economics, Springer, vol. 33(2), pages 159-178, April.
    6. Nesta, Lionel & Vona, Francesco & Nicolli, Francesco, 2014. "Environmental policies, competition and innovation in renewable energy," Journal of Environmental Economics and Management, Elsevier, vol. 67(3), pages 396-411.
    7. Buehler, Stefan & Schmutzler, Armin & Benz, Men-Andri, 2004. "Infrastructure quality in deregulated industries: is there an underinvestment problem?," International Journal of Industrial Organization, Elsevier, vol. 22(2), pages 253-267, February.
    8. Alberto Alesina & Silvia Ardagna & Giuseppe Nicoletti & Fabio Schiantarelli, 2005. "Regulation And Investment," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 791-825, June.
    9. Bruno, Giovanni S.F., 2005. "Approximating the bias of the LSDV estimator for dynamic unbalanced panel data models," Economics Letters, Elsevier, vol. 87(3), pages 361-366, June.
    10. Bun, Maurice J. G. & Kiviet, Jan F., 2003. "On the diminishing returns of higher-order terms in asymptotic expansions of bias," Economics Letters, Elsevier, vol. 79(2), pages 145-152, May.
    11. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    12. Siliverstovs, Boriss & L'Hegaret, Guillaume & Neumann, Anne & von Hirschhausen, Christian, 2005. "International market integration for natural gas? A cointegration analysis of prices in Europe, North America and Japan," Energy Economics, Elsevier, vol. 27(4), pages 603-615, July.
    13. Anupama Sen & Tooraj Jamasb, 2010. "The Economic Effects of Electricity Deregulation: An Empirical Analysis of Indian States," Working Papers EPRG 1001, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    14. Stefan Buehler & Dennis Gärtner & Daniel Halbheer, 2006. "Deregulating Network Industries: Dealing with Price-quality Tradeoffs," Journal of Regulatory Economics, Springer, vol. 30(1), pages 99-115, July.
    15. John Vickers, 1995. "Competition and Regulation in Vertically Related Markets," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(1), pages 1-17.
    16. David Roodman, 2006. "How to Do xtabond2," North American Stata Users' Group Meetings 2006 8, Stata Users Group.
    17. Höffler, Felix & Kranz, Sebastian, 2011. "Legal unbundling can be a golden mean between vertical integration and ownership separation," International Journal of Industrial Organization, Elsevier, vol. 29(5), pages 576-588, September.
    18. Faye Steiner, 2003. "Regulation, industry structure and performance in the electricity supply industry," OECD Economic Studies, OECD Publishing, vol. 2001(1), pages 143-182.
    19. Stefan Buehler, 2005. "The Promise and Pitfalls of Restructuring Network Industries," German Economic Review, Verein für Socialpolitik, vol. 6(2), pages 205-228, May.
    20. Paul Nillesen & Michael Pollitt, 2011. "Ownership Unbundling in Electricity Distribution: Empirical Evidence from New Zealand," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 38(1), pages 61-93, January.
    21. Kiviet, Jan F., 1995. "On bias, inconsistency, and efficiency of various estimators in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 68(1), pages 53-78, July.
    22. Froot, Kenneth A., 1989. "Consistent Covariance Matrix Estimation with Cross-Sectional Dependence and Heteroskedasticity in Financial Data," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(3), pages 333-355, September.
    23. Paul L. Joskow, 2008. "Lessons Learned From Electricity Market Liberalization," The Energy Journal, , vol. 29(2_suppl), pages 9-42, December.
    24. Nagayama, Hiroaki, 2009. "Electric power sector reform liberalization models and electric power prices in developing countries: An empirical analysis using international panel data," Energy Economics, Elsevier, vol. 31(3), pages 463-472, May.
    25. repec:hal:spmain:info:hdl:2441/f6h8764enu2lskk9p4oq2cqb0 is not listed on IDEAS
    26. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, April.
    27. rondi, laura & cambini, carlo & bremberger, francisca & gugler, klaus, 2013. "Dividend Policy in Regulated Firms," MPRA Paper 48043, University Library of Munich, Germany.
    28. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    29. Rinaldo Brau & Raffaele Doronzo & Carlo V. Fiorio & Massimo Florio, 2010. "EU Gas Industry Reforms and Consumers' Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 167-182.
    30. Rick L. Williams, 2000. "A Note on Robust Variance Estimation for Cluster-Correlated Data," Biometrics, The International Biometric Society, vol. 56(2), pages 645-646, June.
    31. Paul Conway & Giuseppe Nicoletti, 2006. "Product Market Regulation in the Non-Manufacturing Sectors of OECD Countries: Measurement and Highlights," OECD Economics Department Working Papers 530, OECD Publishing.
    32. Hollas, Daniel R, 1999. "Gas Utility Prices in a Restructured Industry," Journal of Regulatory Economics, Springer, vol. 16(2), pages 167-185, September.
    33. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    34. Gordon, D. V. & Gunsch, K. & Pawluk, C. V., 2003. "A natural monopoly in natural gas transmission," Energy Economics, Elsevier, vol. 25(5), pages 473-485, September.
    35. Sergio Ascari, 2011. "An American Model for the EU Gas Market?," RSCAS Working Papers 2011/39, European University Institute.
    36. Carlo Cambini & Laura Rondi, 2010. "Incentive regulation and investment: evidence from European energy utilities," Journal of Regulatory Economics, Springer, vol. 38(1), pages 1-26, August.
    37. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bastianin, Andrea & Castelnovo, Paolo & Florio, Massimo, 2018. "Evaluating regulatory reform of network industries: a survey of empirical models based on categorical proxies," Utilities Policy, Elsevier, vol. 55(C), pages 115-128.
    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. Nicole Herweg & Stefan Wurster & Kathrin Dümig, 2018. "The European Natural Gas Market Reforms Revisited: Differentiating between Regulatory Output and Outcome," Social Sciences, MDPI, vol. 7(4), pages 1-19, April.
    4. Philipp Steinbrunner, 2023. "I want a quiet life! On productivity and competition in the Central European energy sector," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(2), pages 403-428, April.
    5. António Brandão & Joana Pinho & Joana Resende & Paula Sarmento & Isabel Soares, 2016. "Welfare effects of unbundling under different regulatory regimes in natural gas markets," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 15(2), pages 99-127, August.
    6. Yunus Emre Gürler & Sinan Ertemel & Matthias Finger & Muzaffer Eroğlu, 2024. "Legal and ownership unbundling in the Turkish natural gas market: A comparative analysis," Competition and Regulation in Network Industries, , vol. 25(1), pages 19-42, March.
    7. Sven Heim, Bastian Krieger, and Mario Liebensteiner, 2020. "Unbundling, Regulation, and Pricing: Evidence from Electricity Distribution," The Energy Journal, International Association for Energy Economics, vol. 0(Special I).
    8. del-Río, Belén & Fernández-Sainz, Ana & Martinez de Alegria, Itziar, 2019. "Industrial electricity prices in the European Union following restructuring: A comparative panel-data analysis," Utilities Policy, Elsevier, vol. 60(C), pages 1-1.
    9. Hyland, Marie, 2016. "Restructuring European electricity markets – A panel data analysis," Utilities Policy, Elsevier, vol. 38(C), pages 33-42.
    10. Rabindra Nepal & John Foster & Antonio Carvalho, 2014. "Revisiting Electricity Liberalization and Security of Supply: Empirical Evidence," Energy Economics and Management Group Working Papers 7-2014, School of Economics, University of Queensland, Australia.
    11. Summanen, Tuomo & Arminen, Heli, 2018. "Ownership unbundling in electricity distribution: The Russian experience," Energy, Elsevier, vol. 161(C), pages 1199-1210.
    12. Andrea Bastianin & Paolo Castelnovo & Massimo Florio, 2017. "The Empirics of Regulatory Reforms Proxied by Categorical Variables: Recent Findings and Methodological Issues," Working Papers 2017.22, Fondazione Eni Enrico Mattei.
    13. Opolska, Iweta, 2017. "The efficacy of liberalization and privatization in introducing competition into European natural gas markets," Utilities Policy, Elsevier, vol. 48(C), pages 12-21.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Growitsch, Christian & Stronzik, Marcus, 2011. "Ownership Unbundling of Gas Transmission Networks - Empirical Evidence," EWI Working Papers 2011-7, Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI).
    2. Growitsch, Christian & Müller, Gernot & Stronzik, Marcus, 2008. "Ownership Unbundling in der Gaswirtschaft: Theoretische Grundlagen und empirische Evidenz," WIK Discussion Papers 308, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    3. Roberto Dell'Anno & Adalgiso Amendola, 2015. "Social Exclusion and Economic Growth: An Empirical Investigation in European Economies," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(2), pages 274-301, June.
    4. Gugler, Klaus & Rammerstorfer, Margarethe & Schmitt, Stephan, 2013. "Ownership unbundling and investment in electricity markets — A cross country study," Energy Economics, Elsevier, vol. 40(C), pages 702-713.
    5. Bastianin, Andrea & Castelnovo, Paolo & Florio, Massimo, 2018. "Evaluating regulatory reform of network industries: a survey of empirical models based on categorical proxies," Utilities Policy, Elsevier, vol. 55(C), pages 115-128.
    6. Nepal, Rabindra & Jamasb, Tooraj, 2012. "Reforming the power sector in transition: Do institutions matter?," Energy Economics, Elsevier, vol. 34(5), pages 1675-1682.
    7. Kretschmer, Bettina & Hübler, Michael & Nunnenkamp, Peter, 2010. "Does foreign aid reduce energy and carbon intensities in developing countries?," Kiel Working Papers 1598, Kiel Institute for the World Economy (IfW Kiel).
    8. Swadley, Adam & Yücel, Mine, 2011. "Did residential electricity rates fall after retail competition? A dynamic panel analysis," Energy Policy, Elsevier, vol. 39(12), pages 7702-7711.
    9. Andrea Bastianin & Paolo Castelnovo & Massimo Florio, 2017. "The Empirics of Regulatory Reforms Proxied by Categorical Variables: Recent Findings and Methodological Issues," Working Papers 2017.22, Fondazione Eni Enrico Mattei.
    10. Bakhat, Mohcine & Labandeira, Xavier & Labeaga, José M. & López-Otero, Xiral, 2017. "Elasticities of transport fuels at times of economic crisis: An empirical analysis for Spain," Energy Economics, Elsevier, vol. 68(S1), pages 66-80.
    11. Pock, Markus, 2010. "Gasoline demand in Europe: New insights," Energy Economics, Elsevier, vol. 32(1), pages 54-62, January.
    12. Dang, Viet Anh & Kim, Minjoo & Shin, Yongcheol, 2015. "In search of robust methods for dynamic panel data models in empirical corporate finance," Journal of Banking & Finance, Elsevier, vol. 53(C), pages 84-98.
    13. Liebensteiner, Mario & Wrienz, Matthias, 2020. "Do Intermittent Renewables Threaten the Electricity Supply Security?," Energy Economics, Elsevier, vol. 87(C).
    14. Abonazel, Mohamed R., 2016. "Bias Correction Methods for Dynamic Panel Data Models with Fixed Effects," MPRA Paper 70628, University Library of Munich, Germany.
    15. Dorothée Charlier & Mouez Fodha & Djamel Kirat, 2023. "Residential CO2 Emissions in Europe and Carbon Taxation: A Country-Level Assessment," The Energy Journal, , vol. 44(5), pages 187-206, September.
    16. Mahir Binici & Yin-Wong Cheung & Kon S. Lai, 2011. "Trade Openness, Market Competition, and Inflation: Some Sectoral Evidence from OECD Countries," CESifo Working Paper Series 3690, CESifo.
    17. Andrés Rodríguez-Pose, 2012. "Trade and Regional Inequality," Economic Geography, Taylor & Francis Journals, vol. 88(2), pages 109-136, April.
    18. Garita, Gus, 2009. "How Does Financial Openness Affect Economic Growth and its Components?," MPRA Paper 20099, University Library of Munich, Germany.
    19. Schober, Dominik, 2013. "Static vs. dynamic impacts of unbundling: Electricity markets in South America," ZEW Discussion Papers 13-033, ZEW - Leibniz Centre for European Economic Research.
    20. Polemis, Michael L., 2016. "New evidence on the impact of structural reforms on electricity sector performance," Energy Policy, Elsevier, vol. 92(C), pages 420-431.

    More about this item

    Keywords

    Natural gas; Networks; Regulation; Ownership unbundling; Panel data; L95; L43; C23;
    All these keywords.

    JEL classification:

    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:regeco:v:46:y:2014:i:2:p:207-225. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.