A Dynamic Approach to Estimate the Efficiency of U.S. Electric Utilities

The static production efficiency model and the dynamic duality model of intertemporal decision making using a parametric approach have been continuously developed but in separate direction. The parametric approach takes statistical noise into account, which consequently provides accurate measures in a stochastic environment. In this study the static shadow cost approach and the dynamic duality model of intertemporal decision making are integrated to formulate theoretical and econometric models of dynamic efficiency with intertemporal cost minimizing firm behavior. The dynamic efficiency model is a dynamic measure of firms’ inefficiency and it accounts for allocative and technical inefficiencies of net investment and of variable inputs. The dynamic efficiency model is implemented by using the Generalized Method of Moment (GMM) estimation and empirically applied into a panel data set of 72 U.S. major investor-owned electric utilities using fossil-fuel fired steam electric power generation during the time period of 1986 to 1999. The major results of this study are that most electric utilities in this study underutilized fuel relative to the aggregated labor and maintenance input and they overutilized capital in production. The estimates of the input price elasticities present the substitution possibilities among the inputs. Finally, the results suggest evidence of increasing returns to scale in the production of the electricity industryEfficiency, GMM estimation, shadow cost approach, dynamic duality, deregulation, electricity

An Analysis of Cost Structures in the Electricity Generation Industry

This paper provides up to date firm level analysis of the production technology and cost structures in the U.S. electric power generation industry. The paper applies an econometric approach into a dual restricted variable cost function within a “temporal equilibrium” framework. The Generalized Method of Moments (GMM) estimation is used to estimate the cost structures in the electric power generation industry. This paper is empirically implemented using a panel data (1986-1998) on 32 nuclear power generations for major investor owned utilities. The major result indicates that most of electric utilities in the nuclear electricity generation industry overutilized capital in production over time. Technological progress may have slowed over the sample period of this study. The results also show that electric utilities with small generation were operating at decreasing returns to scale whereas those with large generation were operating at increasing returns to scale in the production of the electricity industry in the sample data.

The Dynamics of Efficiency and Productivity Growth in U. S. Electric Utilities

This study recognizes explicitly the efficiency gain or loss as a source in explaining the growth. A theoretically consistent method to estimate the decomposition of dynamic total factor productivity growth (TFP) in the presence of inefficiency is developed which is constructed from an extension of the dynamic TFP growth, adjusted for deviations from the long-run equilibrium within an adjustment cost framework. The empirical case study is to U.S. electric utilities, which provides a measure to evaluate how different electric utilities participate in the deregulation of electricity generation. TFP grew by 2.26 percent per annum with growth attributed to the combined scale effects of 0.34 percent, the combined efficiency effects of 0.69 percent, and the technical change effect of 1.22 percent. The dynamic TFP grew by 1.66 percent per annum for electric utilities located within states with the deregulation plan and 3.30 percent per annum for those located outside. Electric utilities located within states with the deregulation plan increased the outputs by improving technical and input allocative efficiencies more than those located outside of states with deregulation plans.productivity growth, adjustment costs, dynamic duality, inefficiency, decomposition, deregulation, e

Regulatory Reform and Economic Performance in US Electricity Generation

In this paper we investigate the effect of the introduction of incentive regulation upon the total factor productivity (TFP) growth of electricity generation companies in the United States, using sample data on 61 firms observed over a 13-year period from 1986 to 1998. Empirical estimates of TFP growth are obtained using three techniques: Tornqvist index numbers, a stochastic cost frontier and a stochastic input distance function. The results obtained using the stochastic cost frontier are discarded because they are found to differ from those obtained using the other techniques, apparently as a consequence of violations of the required cost minimizing behavioral assumptions, which are not uncommon in regulated industries. Tests of hypotheses regarding the effect of regulatory reform upon TFP (using the distance function results) indicate that the introduction of incentive regulation has not had the desired positive effect upon the economic performance of the firms involved. In fact, in the case of these data, we find that performance is negatively related with the introduction of the new regulatory regimes, a result that is the opposite of the theoretical predictions.

Agricultural productivity growth in the European Union and transition countries

Malmquist total factor productivity (TFP) index has been extensively applied in the literature to measure productivity growth decomposition. This study applies a parametric decomposition of a Generalized Malmquist TFP index to measure and compare the levels and trends in agricultural productivity in European countries, making use of the most-recent data available from the Food and Agriculture Organization (FAO) of United Nations. The aim of this study is to measure TFP developments in agriculture of transition countries after breakdown of socialism and to compare their TFP growth with other European countries. The Generalized Malmquist productivity index can be decomposed into technological change, technical efficiency change and scale efficiency change. These measures will provide insightful information for policymakers in designing proper policies to promote a higher growth rate in agriculture in transition countries. -- G E R M A N V E R S I O N: Malmquist Total Factor Productivity (TFP) Index gehört zu den meist verwendeten Methoden der Produktivitätsanalyse und ihrer Zerlegung. In diesem Paper wird ein parametrisches Verfahren eingesetzt, um die Produktivitätsentwicklungen in der europäischen Agrarwirtschaft zu analysieren. Die statistische Datenbasis basiert auf der Datenbank der Food and Agriculture Organization (FAO) of United Nations. Das Ziel dieses Forschungsvorhabens ist es, die Produktivitätsentwicklungen in den Agrar- und Ernährungssektoren der Transformationsländern Mittel- und Osteuropas sowie der ehemaligen Sowjetunion zu messen und diese mit dem Wachstum in der Europäischen Union zu vergleichen. Methodisch kann Malmquist Index zerlegt werden in technical change, efficiency change and scale efficiency change. Dieser Zerfall des Indexes kann wichtige Informationen für die Politikgestalter und Forscher hinsichtlich der weiteren Entwicklung des Agrarsektors in betroffenen Ländern bringen.Transition countries,Malmquist,Multifactor Productivity,agriculture,Transformation,Malmquist Index,Agrarsektor,Multifactor Productivity

Curvature-Constrained Estimates of Technical Efficiency and Returns to Scale for U.S. Electric Utilities

We estimate an input distance function for U.S. electric utilities under the assumption that non-negative variables associated with technical inefficiency are timeinvariant. We use Bayesian methodology to impose curvature restrictions implied by microeconomic theory and obtain exact finite-sample results for nonlinear functions of the parameters (eg. technical efficiency scores). We find that Bayesian point estimates of elasticities are more plausible than maximum likelihood estimates, technical efficiency scores from a random effects specification are higher than those obtained from a fixed effects model, and there is evidence of increasing returns to scale in the industry.

Recent evidence on agricultural efficiency and productivity in China: a metafrontier approach

Economic reform in China helped transform the structure and volume of agricultural production and resulted in significant changes in efficiency and productivity. This paper measures agricultural technical efficiency (TE) and total factor productivity (TFP) in China by allowing producers operating under their own technologies. A metafrontier function approach is applied using a panel data set on 28 provinces during 1991-2005. The provinces are categorized into advanced-technology and low-technology provinces. Based on the metafrontier estimation, TFP growth is decomposed into TE change (TEC), technical change (TC) and scale efficiency change (SEC). This information is useful for policy makers to design suitable policies in enhancing agricultural TE and TFP growth in China. Our major findings indicate that TC was mostly attributed to Chinese agricultural TFP growth throughout the period of study. SEC and TEC exhibited negative effects to TFP growth for the advance- and low-technology provinces, respectively. Most of the advanced-technology provinces exhibited higher TE than the low-technology provinces. The comparatively low TE scores in the low-technology provinces imply that the low-technology provinces were operating far from the metafrontier. The fluctuation of TE measured with respect to the metafrontier function indicates it is possible that Chinese agricultural TFP growth can be improved through the improvement of TE. The results also show that labor and fertilizer still make important contributions to output, and thus improving the quality of farmers and applying modern physical inputs is also crucial to TFP growth. -- G E R M A N V E R S I O N: Chinas wirtschaftliche Reformen halfen der Landwirtschaft, die Struktur und dem Umfang der landwirtschaftlichen Produktion umzubauen. Signifikante Erhöhungen der Effizienz und der Produktivität waren die Folge. Die vorliegende Arbeit misst technische Effizienz (TE) und total factor productivity (TFP) in China unter der Annahme individueller Technologien der Landwirte. Mit Hilfe eines Paneldatensatzes für 28 Provinzen über den Zeitraum 19912005 wird ein metafrontier Ansatz angewandt. Die Provinzen werden in technologisch fortschrittliche und weniger entwickelte Regionen eingeteilt. Auf der Basis des metafrontier Ansatzes wird das TFP Wachstum in Änderung der technischen Effizienz (TEC), technischen Fortschritt (TC) und Änderung der Skaleneffizienz (SEC) zerlegt. Daraus abgeleitete Informationen sind für die Entwicklung angepasster Politiken zur Förderung technischen Fortschritts und TFP-Wachstums in der chinesischen Landwirtschaft erforderlich. Zentrale Ergebnisse der Analyse zeigen, dass das Wachstum der TFP hauptsächlich durch den technischen Fortschritt erklärt wird. Dagegen weisen SEC und TEC negative Effekte auf das Wachstum der TFP in beiden Provinz-Untergruppen auf. Die Mehrzahl der technisch weiterentwickelten Provinzen weisen eine höhere technische Effizienz als die weniger entwickelten Regionen auf. Die vergleichsweise niedrigen TE-Werte der letzteren deuten auf die weiter entfernte Lage dieser Provinzen von der Metafrontier hin. Die Ergebnisse zeigen, dass Chinas TFP-Wachstum durch eine Steigerung der TE erhöht werden kann. Des Weiteren leisten die Faktoren Arbeit und Düngemittel einen wichtigen Beitrag zur Produktion. Somit sind zusätzlich die Ausbildung der Landwirte und die Bereitstellung moderner Produktionsmittel für die Steigerung der TFP von Bedeutung.Metafrontier,Agriculture,China,Technical Efficiency,Total Factor Productivity,Metafrontier,Landwirtschaft,Stochastic Frontier Schätzung,China,Technische Effizienz,Technischer Fortschritt,Skaleneffizienz,Total Factor Productivity

Dynamic Efficiency Estimation: An Application to US Electric Utilities

The static production efficiency model and the dynamic duality model of intertemporal decision making using a parametric approach have been continuously developed but in separate direction. In this study the static shadow cost approach and the dynamic duality model of intertemporal decision making are integrated to formulate theoretical and econometric models of dynamic efficiency with intertemporal cost minimizing firm behavior. The dynamic efficiency model is empirically implemented using a panel data set of 72 U.S. major investor-owned electric utilities using fossil-fuel fired steam electric power generation during the time period of 1986 to 1999. The major results of this study are that most electric utilities in this study underutilized fuel relative to the aggregated labor and maintenance input and they overutilized capital in production. Electric utilities with relatively high technical inefficiency of variable inputs demand in production in states adopting a deregulation plan improve the performance of the utilities. The estimates of the input price elasticities present the substitution possibilities among the inputs. Finally, the results suggest evidence of increasing returns to scale in the production of the electricity industry.

Dynamic Efficiency Estimation: An Application to US Electric Utilities

The static production efficiency model and the dynamic duality model of intertemporal decision making using a parametric approach have been continuously developed but in separate directions. In this study the static shadow cost approach and the dynamic duality model of intertemporal decision making are integrated to formulate theoretical and econometric models of dynamic efficiency with intertemporal cost minimizing firm behavior. The dynamic efficiency model is empirically implemented using a panel data set of 72 U.S. major investor-owned electric utilities using fossil-fuel fired steam electric power generation during the time period of 1986 to 1999. The major results of this study are that most electric utilities in this study underutilized fuel relative to the aggregated labor and maintenance input and they overutilized capital in production. Electric utilities with relatively high technical inefficiency of variable inputs demand in production in states adopting a deregulation plan improve the performance of the utilities. The estimates of the input price elasticities present the substitution possibilities among the inputs. Finally, the results suggest evidence of increasing returns to scale in the production of the electricity industry

Agricultural efficiency, technical change and productivity in China

Economic reform in China helped transform the structure and volume of agricultural production and resulted in significant changes in efficiency and productivity. This article measures agricultural technical efficiency (TE) and total factor productivity (TFP) in China by including all producers in different groups operating under their own technologies. A metafrontier function approach is applied using a panel data set on 28 provinces during 1991–2005. The provinces are categorised into advanced and low-technology provinces. Based on the metafrontier estimation, TFP growth is decomposed into TE change (TEC), technical change (TC) and scale efficiency change (SEC). Our major findings indicate that TC contributed most to Chinese agricultural TFP growth throughout the period of study. SEC and TEC exhibited negative effects on TFP growth for the advanced and low-technology provinces respectively. Most of the advanced-technology provinces exhibited higher TE than the low-technology provinces. The comparatively low TE scores in the low-technology provinces imply that the low-technology provinces were operating far from the metafrontier. The results also show that labour and fertiliser still make important contributions to output, and thus improving the quality of farmers and applying modern physical inputs is also crucial to TFP growth.