Decoupling in electric utilities

Distributing electricity to users has been covered through the charge per kilowatt-hour for electricity used. Conservation advocates have promoted policies that “decouple” distribution revenues or profits from the amount of electricity delivered, claiming that usage-based pricing leads utilities to encourage use and discourage conservation. Because decoupling separates profits from conduct, it runs against the dominant finding in regulatory economics in the last 20 years—that incentive-based regulation outperforms rate-of-return profit guarantees. Even if distribution costs are independent of use, some usage charges can be efficient. Price-cap regulation may distort incentives to inform consumers about energy efficiency—getting more performance from less electricity. Utilities will subsidize efficiency investments, but only when prices are too low. If consumers fail to adopt energy efficiency measures that would be individually beneficial, decoupling can increase welfare, but only if all energy revenues are separated from use, not just those associated with distribution.     

An analysis of some aspects of regulatory risk and the required rate of return for public utilities

This paper uses a modification of the continuous time asset pricing model of Cox, Ingersoll, and Ross to analyze the effect of regulatory risk on the cost of capital. Analysis shows that random errors in setting the allowed rate of return can either increase or decrease the cost of capital depending on other regulatory parameters. However, the analysis suggests that regulatory risk is not material.     

Regulation and the market for corporate control: Hostile tender offers for electric and gas utilities

We document that regulation significantly constrains takeover activity. Of the twenty-one hostile offers for utilities between 1960 and 1990, only one was successful. In spite of this low rate of completion, announcement period returns to target utilities are positive and significant, although substantially smaller than average returns to nonregulated targets. We examine post-offer events and find that control-market effects are not entirely eliminated. One-third of hostile offers are followed by additional bids, control changes and/or divestitures. The regulatory and political environment changed during the period of this study and the frequency of hostile offers increased. Utility regulation, however, remains a substantial impediment to the completion of hostile takeovers.We have benefited from the insights and commentary of several individuals involved with the utility industry including: Douglas Hawes (LeBoeuf, Lamb, Leiby & MacRae); Lyle Koerper (Kansas Gas & Electric); John Rosenberg (Kansas Power & Light); Mark Sholander, Turner White, and Bernie Beaudoin (Kansas City Power & Light); Neil Talbot (Tellus Institute); Darin Klemm (The Wisconsin Investment Board); Melissa Whitten (Cascade Natural Gas Corp.); Gregory Enholm (Salomon Brothers); and David Medley (Donaldson, Lufkin, and Jenrette). We are also grateful for the comments of Edith Hotchkiss, Michael Jensen, David Mayers, Timothy Mech, Richard Ruback, Robert Taggart, Hassan Tehranian, and William Wilhelm, The paper has been substantially improved by the comments of the editor, Michael Crew, and two announomous referees.     

Welfare effects of unbundling under different regulatory regimes in natural gas markets

In this paper, we develop a theoretical model that enriches the literature on the pros and cons of ownership unbundling vis-à-vis lighter unbundling frameworks in the natural gas markets. For each regulatory framework, we compute equilibrium outcomes when an incumbent firm and a new entrant compete à la Cournot in the final gas market. We find that the entrant’s contracting conditions in the upstream market and the transmission tariff are key determinants of the market structure in the downstream gas market (both with ownership and with legal unbundling). We also study how the regulator must optimally set transmission tariffs in each of the two unbundling regimes. We conclude that welfare maximizing tariffs often require free access to the transmission network (in both regulatoy regimes). However, when the regulator aims at promoting the break-even of the regulated transmission system operator, the first-best tariff is unfeasible in both regimes. Hence, we study a more realistic set-up, in which the regulator’s action is constrained by the break-even of the regulated firm (the transmission system operator). In this set-up, we find that, for a given transmission tariff, final prices in the downstream market are always higher with ownership unbundling than with legal unbundling.     

Determinants of total efficiency in water utilities in Mexico

By using panel data analysis across 368 water utilities in Mexico over the period 2010–2014, we find that small firms are more efficient than medium and large providers and that increasing production is associated with less efficiency. Billing, income collection and profitability are relevant factors to improve efficiency. Medium and large firms require to measure consumption by service with meters in order to increase efficiency, while small firms do not require it.     

Regulatory reform and productivity growth in the UK's public utilities

The reforms in the regulation of the UK'nationalised industries over the last decade are examined and the extent to which they have been successful in achieving one of their declared aims – that of increasing the efficiency of the enterprises' operations – is considered. To achieve this the productivity performance of nine of the largest enterprises over the last twenty years was analysed. The results show that the rate of productivity growth has been significantly higher during the 1980s, compared with the preceeding decade. It is concluded that a large part of the observed upturn in productivity is a result of changes in efficiency.     

Monopsony power and the existence of natural monopoly in energy utilities

The justification for price and entry regulation of firms hinges on whether the firms are natural monopolies, and empirical tests have been used to determine the natural monopoly status of public utilities. However, these tests are biased if the utilities possess monopsony power - a likely case. The bias is against finding natural monopoly status, which can lead to improper policies. An alternative method of testing is proposed which eliminates the bias.     

Condorcet cycles in bipartite populations

Summary. Simple majority voting between pairs of alternatives is used to aggregate individual preferences. The occurence of Condorcet cycles is limited thanks to a principle of homogeneity on individual preferences. The restrictions induced on the domain of the latters are weak: among the n! possible orderings of n alternatives, more than one half are admissible within a domain. The resulting aggregated preference has then a neglectable probability of showing up cycles. We show moreover that the set of individual preferences can be `naturally' partitioned into two such domains. Received: June 17, 1996; revised version: April 15, 1997     

Productivity in the tourism industry

This paper analyzes the efficiency of a Portuguese public-owned hotel chain, Enatur. It applies data envelopment analysis (DEA) to estimate total factor productivity (TFP) change, while breaking it down into technical efficiency and technological change. The benchmarking procedure used is an internal one, which compares hotels with each other. For the period 1999–2001, the hotels are ranked according to their total productivity change. It is concluded that some hotels experienced productivity growth, while others faced a decline. Some implications beneficial for managerial policies were drawn from this study.     

Productivity Convergence in European Manufacturing

The paper empirically investigates international productivity convergence in the manufacturing sector, which was found not converging in earlier studies. The authors analyze subsectors of aggregate manufacturing in order to compare similar technologies and to avoid the mixing of converging and nonconverging subsectors in the aggregate. Some of the subsectors converge while others, as well as aggregate manufacturing, do not. There is stronger evidence of convergence in subsectors with a smaller number of different industries. The latter serves as a proxy for the variety of technologies. Overall, the results highlight the importance of comparing similar technologies when studying productivity convergence.     

Rhythms and cycles in happiness

This study analyses time-dependent rhythms in happiness in three aspects. We show that the Sunday neurosis exists exclusively for men with a medium level of education and both men and women with high levels of education. Men with high levels of education may even experience a weekend neurosis. This study is the first to test for intra-monthly rhythms and to demonstrate that men with a lower educational background may suffer from negative effects on happiness towards the end of the month, potentially because of liquidity problems. The study is also the first to demonstrate that happiness exhibits seasonal effects over the annual period, depending on gender and education.     

Unemployment rate cycles in Europe

This article analyses the duration of cycles in the unemployment rate series in a group of EU countries. It extends the model by Bierens (2001) and follows Gil-Alana (2001) by allowing for fractional cyclical integration. Once cycles are introduced in the model, we have more evidence of mean reversion than in previous studies.     

Revision of conjectures about the opponent’s utilities in signaling games

In this paper we apply the concept of preference conjecture equilibrium introduced in Perea (2005) to signaling games and show its relation to sequential equilibrium. We introduce the concept of minimum revision equilibrium and show how this can be interpreted as a refinement of sequential equilibrium     

Regional income mobility in large cities throughout China

We investigated the regional income mobility in China for the year 1994–2016. Using the data collected from 185 prefecture-level cities, we find evidence that the regional income mobility was increasing over past two decades. By connecting income mobility with inequality index, we could draw a graph indicating an inverse U-shape relation between the two variables. We also provide the regional income mobility of the world for comparison.     

中国全要素生产率的估算:1979—2004

本文在分析比较了全要素生产率四种估算方法的基础上,估算出我国1979—2004年间的全要素生产率增长率,并对我国全要素生产率增长和经济增长源泉做了简要分析。分析表明(1)1993年以前,我国的全要素生产率增长率总体呈现出涨跌互现的波动情形且波动较为剧烈频繁,1993年以来,则呈现出逐年下降趋势,直到2000年才得以缓解,此后全要素生产率增长率总体呈现出逐年攀升势头;(2)1979—2004年间我国全要素生产率增长率及其对经济增长的贡献率较低,表明我国经济增长主要依赖于要素投入增长,是一种较为典型的投入型增长方式;(3)我国全要素生产率增长率较低的原因在于技术进步率偏低、生产能力没有得到充分利用、技术效率低下和资源配置不尽合理。     

Innovation and Productivity in European Industries

The labour productivity impact of innovation is investigated in this paper combining neo-Schumpeterian insights on the variety of innovation with the importance of industrial structures and firm size; two models are proposed for explaining productivity and export success in European manufacturing industries and firm-size classes. The empirical estimates are based on data from the European innovation survey (CIS 2), covering Austria, France, Italy, the Netherlands, and the UK, broken down by 22 sectors and for large, medium, and small firms. The econometric results, obtained adopting cross-sectional estimation methodologies able to account for unobserved industrial characteristics, show that productivity in Europe relies on product and process innovation, with the support of the efficiency gains provided by grouped business structures. Conversely, in Italy the introduction of new machinery linked to innovation appears as the key mechanism supporting domestic productivity. When export success is considered, all countries have to rely on an innovation-based model of competitiveness.     

Productivity and Policy in Higher Education

Understanding and improving the performance of public higher education institutions is a matter of growing interest to university and government leaders. To this end, this article surveys dimensions of recent approaches to productivity measurement in higher education, illustrating trends, limitations and developments, and exemplifies these with reference to Australian universities. The article closes by discussing policy considerations that would help augment the design of policy, making comment on the implications for performance‐incentivised funding of higher education.