APPLICATION OF PANEL DATA MODELS IN BENCHMARKING ANALYSIS OF THE ELECTRICITY DISTRIBUTION SECTOR*

ABSTRACT ** : This paper explores the application of several panel data models in measuring productive efficiency of the electricity distribution sector. Stochastic Frontier Analysis has been used to estimate the cost‐efficiency of 59 distribution utilities operating over a nine‐year period in Switzerland. The estimated coefficients and inefficiency scores are compared across three different panel data models. The results indicate that individual efficiency estimates are sensitive to the econometric specification of unobserved firm‐specific heterogeneity. This paper shows that alternative panel models such as the ‘true’ random effects model proposed by Greene (2005) could be used to explore the possible impacts of unobserved firm‐specific factors on efficiency estimates. When these factors are specified as a separate stochastic term, the efficiency estimates are substantially higher suggesting that conventional models could confound efficiency differences with other unobserved variations among companies. On the other hand, refined specification of unobserved heterogeneity might lead to an underestimation of inefficiencies by mistaking potential persistent inefficiencies as external factors. Given that specification of inefficiency and heterogeneity relies on non‐testable assumptions, there is no conclusive evidence in favour of one or the other specification. However, this paper argues that alternative panel data models along with conventional estimators can be used to obtain approximate lower and upper bounds for companies' efficiency scores.     

Unobserved heterogeneity in stochastic cost frontier models: an application to Swiss nursing homes

Housing price-to-income and price-to-rent ratios are among the most widely monitored indicators of housing market conditions. While these ratios tend to fluctuate around a constant level or a mild trend over the long term, they also tend to deviate from these benchmarks for protracted periods. Traditional unit root tests often indicate the presence of a unit root. This article uses the framework of fractional integration to test the persistence of price-to-income and price-to-rent ratios in a sample of 16 OECD countries spanning four decades. The results indicate that the ratios are highly persistent. The possibility that persistence estimates may be affected by structural breaks in the series is also considered, but evidence of such breaks is found only in a very limited number of cases. Policy action may be required if high price-to-income and price-to-rent ratios have adverse social and economic consequences. Policies should be guided by a careful analysis of the factors behind high ratios.     

AN EMPIRICAL ANALYSIS OF CHILD CARE DEMAND IN SWITZERLAND

ABSTRACT ** :  This paper analyzes the demand of Swiss families for child care facilities. A choice experiment is used to study the effects of the facilities' characteristics as well as socio-economic factors on the selected child care mode. The experimental data are analyzed using a discrete choice model with multinomial logit specification. The results suggest that the demand for extra-familial day care could be considerably higher than that observed from the actual choices constrained by insufficient provision of affordable day care. The price, access, and the quality of service as well as parents' income and education have important impacts on the choice of the mode of care.     

An Empirical Analysis of Cost Efficiency in Non‐profit and Public Nursing Homes

Abstract *** :  This paper examines the issue of cost‐efficiency in Switzerland's nursing homes, an issue of concern to policy makers because of the rapid growth of elderly care expenditure and the aging of the population. The fact that nursing homes in Switzerland exist in different institutional forms, private for‐profit, government and non‐profit status, raises the issue of their relative cost efficiency. A panel data of 17 public and 19 nonprofit nursing homes operating over the 9‐year period from 1993 to 2001, in one of the 26 Swiss cantons, Ticino, is studied. Ticino's nursing homes are heavily regulated and monitored by the canton's authorities. However, given that in public firms there are more bureaucratic constraints and agency problems, one can expect a relatively low level of cost‐efficiency. In this paper the effect of institutional form on efficiency is studied using a translog stochastic cost‐frontier model. Several specifications are used to study the robustness of the results. The results suggest that the institutional form influences the efficiency of the studied nursing homes in that non‐profit foundations are likely to be more cost‐efficient than the nursing homes operated by government administration. The results also suggest that a great majority of the nursing homes in the sample do not fully benefit from scale economies. This implies that efficiency gains can be obtained with larger capacities or joint operations .     

Regulation and Measuring Cost-Efficiency with Panel Data Models: Application to Electricity Distribution Utilities

This paper examines the performance of panel data models in measuring cost-efficiency of electricity distribution utilities. Different cost frontier models are applied to a sample of 59 utilities operating in Switzerland from 1988 to 1996. The estimated coefficients and inefficiency scores are compared across different specifications. The results indicate that while the average inefficiency is not sensitive to the econometric specification, the efficiency ranking varies significantly across models. The reasonably low out-of-sample prediction errors suggest that panel data models can be used as a prediction instrument in order to narrow the information gap between the regulator and regulated companies.     

The temporal variation of cost-efficiency in Switzerland’s hospitals: an application of mixed models

This paper uses a mixed effects model to examine the temporal variation of cost efficiency in Switzerland’s general hospitals. The variations in total costs, the number of empty beds and the length of hospital stays are analyzed using financial data from a sample of 168 hospitals operating from 1998 to 2003, as well as hospitalization records disaggregated to Diagnosis Related Groups. Individual intercepts and random coefficients are used to account for the unobserved time-invariant heterogeneity and the differences in temporal patterns across hospitals and DRG categories. The analysis illustrates the usefulness of mixed models to account for unobserved factors such as quality, with a relatively weak assumption that their temporal variations, rather than their initial levels, be uncorrelated with efficiency changes. The results indicate that hospitals have adopted measures to curtail hospitalizations and reduce empty beds. The extent and effectiveness of these measures vary significantly across individual hospitals. However, there is no evidence in favor of a particular ownership type or subsidization regime. While the link between reduction rates of empty beds and gains in cost-efficiency is statistically significant, the expected association between shortening hospital stays and cost-efficiency cannot be clearly established in the data.

Shaping the organisational context for corporate entrepreneurship and performance in Iran: the interplay between social context and performance management

Abstract

Prior research highlighted the importance of an organisational context stimulating autonomous behaviour when trying to increase levels of corporate entrepreneurship. From a social exchange perspective, we argue that firms in developing countries need to complement such supportive practices with performance-oriented practices. Our findings indicate that Iranian firms with an organisational context characterised by an interaction of social context and performance management have more engagement in corporate entrepreneurship, and that corporate entrepreneurship mediated the relationship between the organisational context and firm performance. This provides a better understanding of the way firms in developing economies can shape their organisational context to promote corporate entrepreneurship in order to achieve better firm performance.