Did Unbundling and Incentive Regulation in Electricity Boost Efficiency Gains in Latin America?
Year: 2024
Type: article
Abstract: Since the 1990s different reforms have been implemented in the electricity sector of many Latin American countries. Those embraced vertical disintegration, privatization, and the introduction of incentive regulation, while vertically integrated public monopolies prevailed in other Latin American countries. We explore the technology of the electricity distribution sector in Latin America to analyze productive efficiency. We use a parametric stochastic distance function which includes controls, companies' features, private versus public property, vertically integrated versus unbundled sectors, and the regulatory model which defines the pitch, among others. We examine a sample of 73 electricity distribution companies from 9 different countries over 14 years and find 70 percent average efficiency. This study differs from the preceding literature (discussed extensively) because: 1) it encompasses several Latin American countries (while most existent studies focus on national cases); 2) it uses a specially developed database, which standardizes variables and covers longer periods than preceding studies to employ econometric estimation techniques; 3) it addresses various aspects of the efficiency discussion. The subset of distributors regulated as reference firms, private, and unbundled seems to be more efficient than firms regulated under Cost-Plus or conventional Price-Cap, public, and vertically integrated.
Language: English
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W4415721863