Do Markets Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency

63 Pages Posted: 20 Jan 2005 Last revised: 29 Oct 2010

See all articles by Kira Markiewicz

Kira Markiewicz

affiliation not provided to SSRN

Nancy L. Rose

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Catherine D. Wolfram

University of California, Berkeley - Economic Analysis & Policy Group; National Bureau of Economic Research (NBER)

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Date Written: December 2004

Abstract

While neoclassical models assume static cost-minimization by firms, agency models suggest that firms may not minimize costs in less-competitive or regulated environments. We test this using a transition from cost-of-service regulation to market-oriented environments for many U.S. electric generating plants. Our estimates of input demand suggest that publicly-owned plants, whose owners were largely insulated from these reforms, experienced the smallest efficiency gains, while investor-owned plants in states that restructured their wholesale electricity markets improved the most. The results suggest modest medium-term efficiency benefits from replacing regulated monopoly with a market-based industry structure.

Suggested Citation

Markiewicz, Kira and Rose, Nancy L. and Wolfram, Catherine D., Do Markets Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency (December 2004). NBER Working Paper No. w11001, Available at SSRN: https://ssrn.com/abstract=637498

Kira Markiewicz

affiliation not provided to SSRN

No Address Available

Nancy L. Rose (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-318A
Cambridge, MA 02142
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Catherine D. Wolfram

University of California, Berkeley - Economic Analysis & Policy Group ( email )

Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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