Thomas Weyman-Jones

Efficiency and ownership in electricity distribution: A non-parametric model of the Turkish experience

The traditional structure of integrated monopoly in electricity supply is being abandoned and the general trend is towards privatization and deregulation. Turkey is no exception and has been deregulating its electricity market since 1984. Now, along side the publicly operated distribution organizations, there are four privately operated companies on the distribution side. This paper uses a non-parametric methodology to create a benchmark measure for the relative performance of the publicly operated organizations as well as the publicly operated organizations and their private counterparts. The early results show better technical and scale efficiency scores for the privately operated distribution organizations. However, this does not necessarily imply the success of private ownership in electricity distribution, since there are also technically and scale efficient publicly operated distribution organizations. This article therefore concentrates on finding the sources of inefficiencies by analysis of data and market structure, and discusses these in the context of the Turkish electricity market.

Technical and scale efficiency in UK building societies

A non-parametric programming approach is utilized in order to analyse the overall technical efficiency of UK building societies and to decompose this measure into its subcomponents, pure technical and scale efficiency. Non-parametric statistical analysis and regression analysis are subsequently used to test the relationship between asset size and the various measures of efficiency. The use of 1988 data (post 1986 Building Societies Act) permits the non-parametric analysis of building society efficiency to be conducted in a multi-product context.

Productive efficiency in a regulated industry: The area electricity boards of England and Wales

The comparative efficiency of privatized electricity distribution is critical to the case for deregulation. The area electricity boards in England and Wales are to be privatized in 1990, and measurement of the potential efficiency gains is essential to the proposed regulatory regime. This paper describes a non-parametric linear programming methodology for measuring productive efficiency which was pioneered by Farrell, and applies it to the present regulated electricity distribution industry in England and Wales. It finds that only five of the twelve boards are technically efficient, and that there are wide divergences in performance. Target improvements for inefficient boards are suggested, and implications for the regulatory mechanism are drawn.

X-efficiency and technical efficiency*

Efficiency measurement has become a very popular field in applied economics in recent years, and with this interest there has been a large intellectual investment in refining the empirical methods available to researchers in the area. In this paper we relate these developments to Harvey Leibensteins original 1966 insight into the psychological ideas underlying the notion that economic agents may not achieve maximal efficiency in their productive decisions and behaviour. Of course, it is always possible to argue that apparent inefficiency only arises from a failure of the observer to realise what it is that is being maximized. However, we evade this easy escape route into non-falsifiable hypothesizing, and instead take at face value the fact that too many empirical studies have come up with substantial measures of inefficiency for us to ignore its importance for normative economics.

Measuring Potential Gains from Mergers Among Electricity Distribution Companies in Turkey Using a Non-Parametric Model

Turkish electricity reform is entering a new phase through the Turkish Governments proposal to create 21 new distribution companies, 18 of them through merger. Two aspects of merger analysis are the operational cost savings and the potential production efficiency gains. This paper concentrates on the second aspect and uses a recently developed methodology to assess the potential effect of these mergers and whether these mergers are efficiency enhancing. This is performed by comparing the actual efficiency levels of observed distribution companies with the merger of proposed aggregated companies. The model is calibrated on panel data from 1999 to 2003 which include measures of physical capital and labour inputs, as well as customer and energy related outputs. The results indicate potential for considerable efficiency gains from the proposed mergers.

Relative National Efficiency and Country Size: Evidence for Developing Countries

The paper investigates the impact of country size on aggregate national efficiency, using a nonparametric programming methodology to measure output distance functions and relative national efficiency for a group of 85 developing countries over the period 1980-89. Tobit regression models are estimated in order to identify the influence of national and policy characteristics on intercountry differences in relative efficiency levels. The results indicate that there is a strong positive developmental-efficiency relationship and evidence of a positive impact of trade policy openness on aggregate efficiency. There is also some evidence of a country size constraint on efficiency when other influences are controlled for. Copyright Blackwell Publishing Ltd 2003

Cost efficiency analysis in banking industries of ten Asian countries and regions

Despite the great achievement of three decades of economic reform, the Chinese banking sector takes the blame for its dysfunctional system, especially the large amount of non-performing loans. The ease of foreign banks’ entry set by the WTO from December 2007 raises our concern of the capability of domestic banks to compete against foreign Asian banks. This study attempts to address this issue by measuring the cost efficiency of ten major Asian banking industries from 1998 to 2005 using panel data stochastic frontier approaches. Based on our preferred consistent panel data estimating models, the higher cost efficiency score from including cross-country environmental variables suggests that differences between countries can explain part of the inefficiency. We also find that the overall cost efficiency level of Chinese commercial banks ranks in the fifth place, suggesting that Chinese banks still need to strengthen their ability in competition. Some policy implications are also suggested.

The Behaviour of the Firm under Alternative Regulatory Constraints

The authors review the case for intermediate power incentive regulation, such as sliding scale, when the regulator is badly informed and the firms profits have a shadow resource cost. They then evaluate a number of different regulatory regimes, including sliding scale, in terms of productive and allocative efficiency. The authors find the sliding scale principle can be applied quite generally--to dividends, profits, or rate of return--and that it has attractive economic properties. Copyright 1998 by Scottish Economic Society.

Efficiency of transition banks: inter-country banking industry trends

This study investigates the trend of X-(in) efficiencies across Eastern European 2004-accession countries’ banking industries over the period 1999 to 2003. We use Data Envelopment Analysis (DEA) estimators to obtain proxies for X-(in)efficiencies and we then analyse the inter-country industry differences using the methodology of Simar and Zelenyuk (2007) and the impact of country-specific environmental conditions, following Simar and Wilsons (2007) truncated regression with bootstrap methodology. Overall, the results suggest that Eastern European banking had considerable scope for X-efficiency improvements. However, the results also demonstrate that the efficiency gap between the sample countries declined over the period, and fewer environmental factors contributed to the difference in the banking efficiency levels.

Evaluating Gains from Mergers in a Non-Parametric Public Good Model of Police Services

The merger of police services in the UK has been suggested on the grounds that efficiency improvements will be possible. This paper applies a public good model of the police service to evaluate the potential efficiency gains from mergers of police services in England and Wales. We construct a dataset that reflects the public good nature of police service and allows for the exogenous imposition by Government of the level of police service budgets. Our main finding is that English and Welsh police force mergers could lead to increases in police staff resource efficiencies between 10% and 70%.