Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
Department of Business and Management Science, Norwegian School of Economics (NHH) Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)

No 2015/22:
Optimal Scale in Different Environments – The Case of Norwegian Electricity Distribution Companies

Xiaomei Cheng (), Endre Bjørndal () and Mette Bjørndal ()

Abstract: We study returns to scale in Norwegian electricity distribution companies. The scale issue of this sector has become an important political question, and it was for instance discussed by the Reiten commission (OED, 2014) in a study about the future structure and organization of the Norwegian electricity network industry. We use panel data from the Norwegian Water Resources and Energy Directorate (NVE) for the period from 2004 to 2010. The Data Envelopment Analysis (DEA) method and the Stochastic Nonparametric Envelopment of Data (StoNED) approach are applied to examine the scale issue. We show that a majority of the companies are smaller than the optimal size, in line with Kumbhakar et al. (2014). The performance of Norwegian distribution companies are influenced by a number of environmental factors, and some of these factors are negatively correlated with company size. However, our results show that controlling for environmental factors when estimating returns to scale does not have a big effect on the estimated optimal sizes.

Keywords: Returns to scale; electricity distribution companies; Data Envelopment Analysis; Stochastic Nonparametric Envelopment of Data; (follow links to similar papers)

JEL-Codes: Q00; (follow links to similar papers)

22 pages, September 17, 2015

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

300271    PDF-file
Download Statistics

Questions (including download problems) about the papers in this series should be directed to Stein Fossen ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:nhhfms:2015_022 This page was generated on 2015-09-17 12:31:20