The Case for International Coordination of Electricity Regulation: Evidence from the Measurement of Efficiency in South America

A decade of experience has shown that monitoring the performance of public and private monopolies is the hardest part of electricity sector reform in South America—because operators control most of the information needed for effective regulation. South American electricity regulators can reduce this information asymmetry by increasing international coordination and relying on comparative measures of efficiency. To make it possible for them to do so, countries should harmonize their regulatory databases and develop methodologies for making comparisons. This paper uses data envelopment analysis and stochastic frontier analysis to estimate the efficiency of South America's main electricity distribution companies. Both approaches allow regulators to use relatively simple tests to check the robustness of their findings, strengthening their positions at regulatory hearings.     

Experiments on Damage-Based Ambient Taxes for Nonpoint Source Polluters

This article presents experimental tests of a linear and a nonlinear ambient tax mechanism that involve modest information requirements for the regulator. When agents are not allowed to communicate, both tax mechanisms result in emission levels that approximate the social optimum. When agents can communicate, emissions are considerably below the optimum, but we show that the tax function can be scaled to achieve social efficiency. Finally, by disaggregating the overall efficiency measure, we show that changing the pollution threshold that triggers the tax increases the inefficiency resulting from variation in agent-level decisions, but does not affect average emissions.