Scandinavian Working Papers in Economics
Working Papers,
Copenhagen Business School, Department of Economics
No 4-2020: Network Utilities Performance and Institutional Quality: Evidence from the Italian Electricity Sector
Golnoush Soroush (), Carlo Cambini, Tooraj Jamasb () and Manuel Llorca ()
Additional contact information
Golnoush Soroush: Department of Management, Politecnico di Torino, Italy
Carlo Cambini: Department of Management, Politecnico di Torino, Italy
Tooraj Jamasb: Department of Economics, Copenhagen Business School, Postal: Copenhagen Business School, Department of Economics, Porcelaenshaven 16 A. 1. floor, DK-2000 Frederiksberg, Denmark
Manuel Llorca: Department of Economics, Copenhagen Business School, Postal: Copenhagen Business School, Department of Economics, Porcelaenshaven 16 A. 1. floor, DK-2000 Frederiksberg, Denmark
Abstract: It is generally accepted that institutions are important for economic development. However, whether the performance of regulated utilities within a country is affected by the quality of institutions is yet to be investigated thoroughly. We analyse how the quality of regional institutions impact performance of Italian electricity distribution utilities. We use a stochastic frontier analysis approach to estimate cost functions and examine the performance of 108 electricity distribution utilities from 2011 to 2015. This unique dataset was constructed with the help of the Italian Regulator for Energy, Networks, and Environment. In addition, we use a recent dataset on regional institutional quality in Italy. We present evidence that utilities in regions with better government effectiveness, responsiveness towards citizens, control of corruption, and rule of law, also tend to be more cost efficient. The results suggest that national regulators should take regional institutional diversity into account in incentive regulation and efficiency benchmarking of utilities.
Keywords: institutional quality; stochastic frontier analysis; electricity distribution in Italy; cost efficiency; inefficiency determinants
34 pages, February 1, 2020
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