IDEAS home Printed from https://ideas.repec.org/a/ucp/jlawec/v42y1999i1p61-87.html
   My bibliography  Save this article

The Bell System Divestiture/Deregulation and the Efficiency of the Operating Companies

Author

Listed:
  • Krouse, Clement G
  • Cabolis, Christos
  • Danger, Kenneth L
  • Carter, Tanja D
  • Riddle, Jon M
  • Ryan, Daniel J

Abstract

A variety of casual evidence has been offered in measurement of the efficiencies, and inefficiencies, thought to flow from the Bell System divestiture and accompanying state regulatory reforms. To address several questions in this regard we estimate a regulated cost function for local exchange services using panel data on the divested Bell Operating Companies (BOCs). Divestiture and regulatory reform are found to have produced significant efficiencies, as of 1993 saving about 20 percent in cost relative to what would have obtained in the absence of these events. More specifically, to 1993 the divestiture yielded savings of $115.4 billion and state-level regulatory reform yielded a slightly smaller $96.7 billion in savings (both measured in 1993 dollars). Output augmentation, factor bias, and allowed rate-of-return effects contribute in identified ways to these overall results. Copyright 1999 by the University of Chicago.

Suggested Citation

  • Krouse, Clement G & Cabolis, Christos & Danger, Kenneth L & Carter, Tanja D & Riddle, Jon M & Ryan, Daniel J, 1999. "The Bell System Divestiture/Deregulation and the Efficiency of the Operating Companies," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 61-87, April.
    • Handle: RePEc:ucp:jlawec:v:42:y:1999:i:1:p:61-87
    DOI: 10.1086/467418
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/467418
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: https://libkey.io/10.1086/467418?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. Ying, John S & Shin, Richard T, 1993. "Costly Gains to Breaking Up: LECs and the Baby Bells," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 357-361, May.
    2. Rolf Fare & James Logan, 1983. "The Rate-of-Return Regulated Firm: Cost and Production Duality," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 405-414, Autumn.
    3. Appelbaum, Elie & Berechman, Joseph, 1991. "Demand conditions, regulation, and the measurement of productivity," Journal of Econometrics, Elsevier, vol. 47(2-3), pages 379-400, February.
    4. Ronald R. Braeutigam & John C. Panzar, 1989. "Diversification Incentives under "Price-Based" and "Cost-Based" Regulation," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 373-391, Autumn.
    5. Evans, David S & Heckman, James J, 1984. "A Test for Subadditivity of the Cost Function with an Application to the Bell System," American Economic Review, American Economic Association, vol. 74(4), pages 615-623, September.
    6. McElroy, Marjorie B, 1987. "Additive General Error Models for Production, Cost, and Derived Demand or Share Systems," Journal of Political Economy, University of Chicago Press, vol. 95(4), pages 737-757, August.
    7. Timothy Brennan, 1996. "Is Cost-of-Service Regulation Worth the Cost?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 3(1), pages 25-42.
    8. Cabral, Luis M B & Riordan, Michael H, 1989. "Incentives for Cost Reduction under Price Cap Regulation," Journal of Regulatory Economics, Springer, vol. 1(2), pages 93-102, June.
    9. Paul L. Joskow & Roger G. Noll, 1981. "Regulation in Theory and Practice: An Overview," NBER Chapters, in: Studies in Public Regulation, pages 1-78, National Bureau of Economic Research, Inc.
    10. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
    11. A. Charnes & W. W. Cooper & T. Sueyoshi, 1988. "A Goal Programming/Constrained Regression Review of the Bell System Breakup," Management Science, INFORMS, vol. 34(1), pages 1-26, January.
    12. Cornwell, Christopher & Schmidt, Peter & Sickles, Robin C., 1990. "Production frontiers with cross-sectional and time-series variation in efficiency levels," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 185-200.
    13. Karen Palmer, 1992. "A Test for Cross Subsidies in Local Telephone Rates: Do Business Customers Subsidize Residential Customers?," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 415-431, Autumn.
    14. Richard T. Shin & John S. Ying, 1992. "Unnatural Monopolies in Local Telephone," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 171-183, Summer.
    Full references (including those not matched with items on IDEAS)

    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. Segendorff, Björn, 1995. "The Telecommunication Market: A Survey of Theory and Empirics," Working Paper Series 442, Research Institute of Industrial Economics.
    2. Resende, Marcelo, 1999. "Productivity growth and regulation in U.S. local telephony," Information Economics and Policy, Elsevier, vol. 11(1), pages 23-44, March.
    3. Kjell Salvanes & Sigve Tjøtta, 1998. "A Note on the Importance of Testing for Regularities for Estimated Flexible Functional Forms," Journal of Productivity Analysis, Springer, vol. 9(2), pages 133-143, March.
    4. Lucinda, Claudio Ribeiro & Anuatti, Francisco, 2017. "Economies of Scale and Scope in the Sanitation Sector," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 37(2), November.
    5. Banker, Rajiv D. & Chang, Hsi-Hui & Majumdar, Sumit K., 1998. "Economies of scope in the U.S. telecommunications industry1," Information Economics and Policy, Elsevier, vol. 10(2), pages 253-272, June.
    6. Das, Nibedita, 2000. "Technology, efficiency and sustainability of competition in the Indian telecommunications sector," Information Economics and Policy, Elsevier, vol. 12(2), pages 133-154, June.
    7. Maher, Maria E., 1999. "Access costs and entry in the local telecommunications network: a case for de-averaged rates," International Journal of Industrial Organization, Elsevier, vol. 17(4), pages 593-609, May.
    8. Wilson, Wesley W. & Zhou, Yimin, 2001. "Telecommunications deregulation and subadditive costs: Are local telephone monopolies unnatural?," International Journal of Industrial Organization, Elsevier, vol. 19(6), pages 909-930, May.
    9. Noel Uri, 2001. "Telecommunications in the United States and Changing Productive Efficiency," Journal of Industry, Competition and Trade, Springer, vol. 1(3), pages 321-335, September.
    10. repec:swn:wpaper:2023-02 is not listed on IDEAS
    11. Subal C. Kumbhakar & Christopher F. Parmeter & Valentin Zelenyuk, 2022. "Stochastic Frontier Analysis: Foundations and Advances I," Springer Books, in: Subhash C. Ray & Robert G. Chambers & Subal C. Kumbhakar (ed.), Handbook of Production Economics, chapter 8, pages 331-370, Springer.
    12. Hahn, Robert & Evans, Lewis, 2010. "Regulating Dynamic Markets: Progress in Theory and Practice," Working Paper Series 4052, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    13. Nick Wills‐Johnson, 2008. "Separability and Subadditivity in Australian Railways," The Economic Record, The Economic Society of Australia, vol. 84(264), pages 95-108, March.
    14. Gary Madden & Harry Bloch & Grant Coble-Neal, 2002. "Labour and capital saving technical change in telecommunications," Applied Economics, Taylor & Francis Journals, vol. 34(14), pages 1821-1828.
    15. Nykamp, Stefan & Andor, Mark & Hurink, Johann L., 2012. "‘Standard’ incentive regulation hinders the integration of renewable energy generation," Energy Policy, Elsevier, vol. 47(C), pages 222-237.
    16. Park, Byeong U. & Sickles, Robin C. & Simar, Leopold, 2003. "Semiparametric-efficient estimation of AR(1) panel data models," Journal of Econometrics, Elsevier, vol. 117(2), pages 279-309, December.
    17. MAIMOUNA DIAKITE & Jean-François BRUN, 2016. "Tax Potential and Tax Effort: An Empirical Estimation for Non-Resource Tax Revenue and VAT’s Revenue," EcoMod2016 9537, EcoMod.
    18. Weisman, Dennis L., 2002. "Strategic sharing in regulatory regimes," Economics Letters, Elsevier, vol. 75(3), pages 361-367, May.
    19. Martin, Sheila Ann, 1992. "The effectiveness of state technology incentives: evidence from the machine tool industry," ISU General Staff Papers 1992010108000011381, Iowa State University, Department of Economics.
    20. Farsi, Mehdi & Filippini, Massimo, 2009. "An analysis of cost efficiency in Swiss multi-utilities," Energy Economics, Elsevier, vol. 31(2), pages 306-315, March.
    21. Tschirhart, John, 1995. "Monopsony power and the existence of natural monopoly in energy utilities," Resource and Energy Economics, Elsevier, vol. 17(4), pages 327-340, December.

    More about this item

    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:ucp:jlawec:v:42:y:1999:i:1:p:61-87. 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: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/JLE .

    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.