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THE ROLE OF MODEL SPECIFICATION IN FINDING THE INFLUENCE OF OWNERSHIP AND REGULATORY REGIME ON UTILITY COST: THE CASE OF SWEDISH ELECTRICITY DISTRIBUTION
Author(s) -
SÖDERBERG MAGNUS
Publication year - 2011
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/j.1465-7287.2010.00209.x
Subject(s) - electricity , incentive , distribution (mathematics) , economics , electric power distribution , econometrics , econometric model , microeconomics , specification , variation (astronomy) , industrial organization , business , mathematics , mathematical analysis , physics , quantum mechanics , voltage , astrophysics , electrical engineering , engineering
The lack of consensus on how utility cost is affected by variation in ownership and regulatory regime has been attributed to sector‐specific conditions and interacting observed heterogeneous factors. This study investigates a further source of ambiguous outcomes as it evaluates different econometric specifications related to variations in utility objective/the design of regulatory regime and influences from unknown/uncertain heterogeneous factors. Consistent with theoretical predictions, 7 years of data from the Swedish electricity distribution sector reveal that private ownership and stronger financial incentives are associated with lower costs. It is also demonstrated that inappropriate model specifications can produce arbitrary conclusions. ( JEL D24, K23, L51, L94)