The effect of restructuring electricity distribution systems on firms’ persistent and transient efficiency: the case of Germany

Oleg Badunenko, Astrid Cullmann, Subal C. Kumbhakar, Maria Nieswand

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    Abstract

    We evaluate the efficiency of electricity distribution operators (DSOs) as providers of local public infrastructure. In particular, we consider two types of efficiency, i.e., short-term (transient) and long-term (persistent). We apply the recently developed four-component stochastic frontier model, which allows identifying determinants of the two types of efficiency, after controlling for firm heterogeneity and random noise, to a panel dataset of German DSOs observed during 2006-2012. Those DSOs operating in the eastern parts of Germany have undergone a profound restructuring after the reunification in 1990. We find that this was beneficial for their efficiency as they perform, on average, better in terms of persistent efficiency than DSOs in West Germany. Both eastern and western DSOs perform similarly well in terms of transient efficiency, which is expected as the sector is highly regulated. As such, we provide new insights on identifying the nature and sources of public infrastructure productive inefficiency, which is relevant for public policies.
    Original languageEnglish
    JournalThe Energy Journal
    Volume42
    Issue number4
    Early online date1 Jun 2021
    DOIs
    Publication statusPublished - 1 Oct 2021

    Keywords

    • production
    • persistent efficiency
    • transient efficiency
    • stochastic frontier model
    • determinants of efficiency

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