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State-Level Electricity Generation Efficiency: Do Restructuring and Regulatory Institutions Matter in the US?

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  • Ajayi, V.
  • Weyman-Jones, T.

Abstract

This paper examines the impact of deregulation and the political support for it on the electric power industry using a consistent state-level electricity generation dataset for the US contiguous states from 1997-2014. Recent analyses of productivity growth suggests that institutional factors are important and we wish to study the role of deregulation as a statelevel institutional change through two measures: (a) restructuring and (b) the political support for it, measured by the majority political affiliation of public utility commissions. We find evidence of positive impacts of deregulation (both restructuring and the political support for it) on technical efficiency across the models estimated. Our preferred model which allows for the control for deregulation variables on the mean and variance of the inefficiency shows an average technical efficiency of 73.1 percent. The results of the marginal effects reveal that the impact of deregulation including its political support on inefficiency is negative and monotonic, with the potential reduction of 8.4 percent in the mean of technical inefficiency, thereby suggesting a compelling evidence for generation efficiency improvement via deregulation.

Suggested Citation

  • Ajayi, V. & Weyman-Jones, T., 2021. "State-Level Electricity Generation Efficiency: Do Restructuring and Regulatory Institutions Matter in the US?," Cambridge Working Papers in Economics 2166, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2166
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    More about this item

    Keywords

    Electricity generation; technical efficiency; marginal effect; restructuring; regulatory institutions;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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