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Scale economies in electricity distribution: a semiparametric analysis
Author(s) -
Yatchew A.
Publication year - 2000
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/(sici)1099-1255(200003/04)15:2<187::aid-jae548>3.0.co;2-b
Subject(s) - electricity , econometrics , panel data , economies of scale , returns to scale , parametric statistics , economies of scope , economics , scale (ratio) , electric power distribution , function (biology) , semiparametric model , distribution (mathematics) , nonparametric statistics , microeconomics , production (economics) , statistics , mathematics , engineering , mathematical analysis , electrical engineering , physics , quantum mechanics , voltage , evolutionary biology , biology
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.