Comparing Brazil and USA electricity performance; what was the impact of privatisation?

Raffaella L. Mota

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Beginning in 1995 a large proportion of the Brazilian electricity distribution sector went through privatisation and restructuring, whereas privately-owned U.S. utilities did not suffer similar ownership change process. This paper is an empirical assessment of the efficiency of the Brazilian distribution sector relative to its U.S. counterpart in 1994 and 2000. Two techniques are applied: Data Envelopment Analysis (DEA), including the computation of Malmquist indices of productivity growth, and Stochastic Frontier Analysis (SFA). For the models that use operating costs as input, we find a positive but not statistically significant impact of Brazilian privatisation on technical efficiency. For the models that use total costs, the impact is significantly negative. Although this should be taken with caution, the negative impact can be the result of an investment surge after privatisation or of an increased rate of substitution of capital for labour in the Brazilian distribution sector. These results suggest that capital costs should not be excluded from the benchmarking. The findings also highlight the importance of establishing standard measures of capital costs for international benchmarking and incentive based regulation.

Keywords: benchmarking; international comparison; technical efficiency; Data Envelopment Analysis; Stochastic Frontier Analysis; Malmquist Productivity Index; electricity distribution systems (search for similar items in EconPapers)
JEL-codes: L94 (search for similar items in EconPapers)
Pages: 63
Date: 2004-04
New Economics Papers: this item is included in nep-com and nep-ene
Note: CMI39, IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

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