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We estimate cost, quality and price models for electricity distribution businesses (EDBs) in New Zealand, treating ownership as endogenous. We also account for simultaneity issues between costs and quality. We… Click to show full abstract
We estimate cost, quality and price models for electricity distribution businesses (EDBs) in New Zealand, treating ownership as endogenous. We also account for simultaneity issues between costs and quality. We find that customer ownership is associated with lower prices and costs, and also with higher quality. We calculate welfare (total surplus) for both customer - and investor-owned EDBs, allowing for the possibility that investor-owned EDBs might produce higher welfare than customer-owned firms (e.g. due to having more valuable customers). However, we find that welfare is higher for customer-owned EDBs. Ownership is treated as endogenous in all models and we instrument it with the presence of regional air quality regulation.
Journal Title: Energy Economics
Year Published: 2020
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