Optimal Scale in Different Environments – The Case of Norwegian Electricity Distribution Companies
Xiaomei Cheng,
Endre Bjørndal (endre.bjorndal@nhh.no) and
Mette Bjørndal (mette.bjorndal@nhh.no)
Additional contact information
Endre Bjørndal: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Mette Bjørndal: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Authors registered in the RePEc Author Service: Endre Jostein Bjørndal (endre.bjorndal@nhh.no)
No 2015/22, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science
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 (search for similar items in EconPapers)
JEL-codes: Q00 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2015-09-17
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Citations: View citations in EconPapers (2)
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