NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Kira R. Fabrizio

Boston University
Tel: 919-660-7760

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Institutional Affiliation: Boston University

NBER Working Papers and Publications

December 2004Do Markets Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency
with Nancy L. Rose, Catherine Wolfram: w11001
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.

Published: Fabrizio, Kira, Nancy Rose and Catherine Wolfram. "Do Markets Reduce Costs? Assessing the Impact of Regulatory Restructuring on U.S. Electric Generation Efficiency.” American Economic Review 97 (September 2007): 1250-1277. citation courtesy of

 
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