European Electricity Market Reforms: Any Signs of Efficiency Improvements?

Abstract

This paper investigates whether European electricity market reforms have induced any changes in firm efficiency either through productive, allocative or dynamic efficiency improvements. In particular, this ex-post analysis looks closely at productivity effects of changing industry structure, ownership structure and regulation with respect to barriers to entry and access to wholesale and retail markets. Based on the European firm-level data for the period 1996-2007, the results indicate sluggish productivity improvements of European electricity firms due to reforms implemented in the last decade. In particular, productivity gains are associated with high-productivity firms close to the technology frontier, while no significant impact is found for the laggards. Looking from a dynamic perspective, it seems that the closest are the firms to the frontier the more they are able to improve productivity in response to liberalization efforts stimulating competition.

Keywords: U Electricity Market Reforms, Firms, Productivity, Regulation, TFP

JEL Classification: F10, L11, L51, L94