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Journal ArticleDOI

Economies of scale in U. S. electric power generation

01 Aug 1976-Journal of Political Economy (The University of Chicago Press)-Vol. 84, Iss: 4, pp 655-676
TL;DR: In this article, the authors estimate economies of scale for U.S. firms producing electric power and conclude that a small number of extremely large firms are not required for efficient production.
Abstract: We estimate economies of scale for U.S. firms producing electric power. Cross-section data for 1955 and 1970 are analyzed using the translog cost function. We find that in 1955 there were significant scale economies available to nearly all firms. By 1970, however, the bulk of U.S. electricity generation was by firms operating in the essentially flat area of the average cost curve. We conclude that a small number of extremely large firms are not required for efficient production and that policies designed to promote competition in electric power generation cannot be faulted in terms of sacrificing economies of scale.
Citations
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Journal ArticleDOI
TL;DR: In this paper, the authors show that the Nash equilibrium in supply schedules implies a high markup on marginal cost and substantial deadweight losses, and that subdividing the generators into five firms would produce better results.
Abstract: Most of the British electricity supply industry has been privatized. Two dominant generators supply bulk electricity to an unregulated "pool." They submit a supply schedule of prices for generation and receive the market-clearing price, which varies with demand. Despite claims that this should be highly competitive, we show that the Nash equilibrium in supply schedules implies a high markup on marginal cost and substantial deadweight losses. Further simulations, to show the effect of entry by 1994, produce somewhat lower prices, at the cost of excessive entry; subdividing the generators into five firms would produce better results.

1,407 citations

Journal ArticleDOI
TL;DR: In this article, the authors examine some of the recent literature on the estimation of production functions and suggest an alternative approach that is based on the ideas in these papers, but does not suffer from the functional dependence problems and produces consistent estimates under alternative data generating processes for which the original procedures do not.
Abstract: This paper examines some of the recent literature on the estimation of production functions. We focus on techniques suggested in two recent papers, Olley and Pakes (1996) and Levinsohn and Petrin (2003). While there are some solid and intuitive identification ideas in these papers, we argue that the techniques can suffer from functional dependence problems. We suggest an alternative approach that is based on the ideas in these papers, but does not suffer from the functional dependence problems and produces consistent estimates under alternative data generating processes for which the original procedures do not.

1,209 citations


Cites background from "Economies of scale in U. S. electri..."

  • ...…the problem of these biases and approaches to solving them (see, e.g., Marschak and Andrews (1944), Hoch (1955, 1958, 1962), Mundlak (1961, 1963, 1996), Mundlak and Hoch (1965), Christensen, Jorgenson, and Lau (1973), Christensen and Greene (1976), McElroy (1987), Panzar (1989), and Slade (1989))....

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  • ...Christensen, Jorgenson, and Lau (1973), Christensen and Greene (1976)), have been generalized in a number of dimensions, including some fairly rich theoretical and statistical models....

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Book ChapterDOI
01 Jan 2008
TL;DR: The Econometrics of Panel DataSpringer Handbook of Science and Technology IndicatorsPanel Data and Econometric Methods for Productivity Measurement and Efficiency Analysis as discussed by the authors, and a Practitioner's Guide to Stochastic Frontier Analysis Using StataBenchmarking for Performance EvaluationEssays on Microeconomics and Industrial OrganisationHealth System EfficiencyInternational Journal of Production EconomicsEconometric Analysis of Model Selection and Model TestingInternational Applications of Productivity and Efficiency analysisAdvanced Robust and Nonparametric Methods in Efficiency Analysis
Abstract: The Econometrics of Panel DataSpringer Handbook of Science and Technology IndicatorsPanel Data EconometricsThe Econometrics of Panel DataA Practitioner's Guide to Stochastic Frontier Analysis Using StataBenchmarking for Performance EvaluationEssays on Microeconomics and Industrial OrganisationHealth System EfficiencyInternational Journal of Production EconomicsEconometric Analysis of Model Selection and Model TestingInternational Applications of Productivity and Efficiency AnalysisAdvanced Robust and Nonparametric Methods in Efficiency AnalysisEconometrics and the Philosophy of EconomicsThe Measurement of Productive EfficiencyMeasuring Efficiency in Health CareFinancial, Macro and Micro Econometrics Using REconometric Analysis of Cross Section and Panel DataApplied EconometricsProductivity and Efficiency AnalysisEconometric Model SelectionProductivity and Efficiency AnalysisStochastic Frontier AnalysisThe Oxford Handbook of Health EconomicsThe Measurement of Productive Efficiency and Productivity GrowthNew Directions in Productivity Measurement and Efficiency AnalysisA Primer on Efficiency Measurement for Utilities and Transport RegulatorsPanel Data EconometricsProduction and Efficiency Analysis with RApplications of Modern Production TheoryThe Measurement of Productive EfficiencyNonparametric Econometric Methods and ApplicationAn Introduction to Efficiency and Productivity AnalysisHealth, the Medical Profession, and RegulationThe Analysis of Household SurveysData Envelopment AnalysisProgramming Collective IntelligenceEfficiency AnalysisProductivity and Efficiency AnalysisMeasurement of Productivity and EfficiencyProduction Frontiers

1,144 citations


Cites background or methods from "Economies of scale in U. S. electri..."

  • ...First, there are now Bayesian applications to problems that have not received much attention in the classical literature, for example, O’Donnell and Coelli’s (2005) application in which they imposed the theoretical curvature conditions on a translog distance function. The estimation of technical or cost inefficiency poses an unusual challenge for Bayesian estimators, however. Since estimates of inefficiency (technical or cost) are individual observation specific, it is not possible to obtain them without assuming an informative prior. Thus, Koop et al. (1994), Tsionas (2002), and Huang (2004) all assume a gamma prior for ln ui with a known mean (and variance)....

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  • ...(yet again) Christensen and Greene’s (1976) electricity generation cost data and the panel data on airlines listed in Greene (1997). Interestingly enough, the copula model applied to the electricity data produce some fairly substantial changes compared to the standard normal–half-normal model....

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  • ...First, there are now Bayesian applications to problems that have not received much attention in the classical literature, for example, O’Donnell and Coelli’s (2005) application in which they imposed the theoretical curvature conditions on a translog distance function....

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  • ...The authors report estimates based on the cost frontier estimated in Greene (1990) using the Christensen and Greene (1976) electricity data (described further below)....

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  • ...Tsionas’s stochastic frontier model [applied to the Christensen and Greene (1976) electricity generation data] is...

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Journal ArticleDOI
23 Feb 1990-Science
TL;DR: In this article, the authors found that organizations vary considerably in the rates at which they learn and that the reasons for the variation observed in organizational learning curves include organizational forgetting, employee turnover, transfer of knowledge from other products and other organizations, and economies of scale.
Abstract: Large increases in productivity are typically realized as organizations gain experience in production. These "learning curves" have been found in many organizations. Organizations vary considerably in the rates at which they learn. Some organizations show remarkable productivity gains, whereas others show little or no learning. Reasons for the variation observed in organizational learning curves include organizational "forgetting," employee turnover, transfer of knowledge from other products and other organizations, and economies of scale.

1,100 citations

Posted Content
TL;DR: Organizations vary considerably in the rates at which they learn, and reasons for the variation observed in organizational learning curves include organizational "forgetting," employee turnover, transfer of knowledge from other products and other organizations, and economies of scale.
Abstract: Large increases in productivity are typically realized as organizations gain experience in production. These "learning curves" have been found in many organizations. Organizations vary considerably in the rates at which they learn. Some organizations show remarkable productivity gains, whereas others show little or no learning. Reasons for the variation observed in organizational learning curves include organizational "forgetting," employee turnover, transfer of knowledge from other products and other organizations, and economies of scale.

1,097 citations

References
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Journal ArticleDOI
TL;DR: In this paper, a method of estimating the parameters of a set of regression equations is reported which involves application of Aitken's generalized least-squares to the whole system of equations.
Abstract: In this paper a method of estimating the parameters of a set of regression equations is reported which involves application of Aitken's generalized least-squares [1] to the whole system of equations. Under conditions generally encountered in practice, it is found that the regression coefficient estimators so obtained are at least asymptotically more efficient than those obtained by an equation-by-equation application of least squares. This gain in efficiency can be quite large if “independent” variables in different equations are not highly correlated and if disturbance terms in different equations are highly correlated. Further, tests of the hypothesis that all regression equation coefficient vectors are equal, based on “micro” and “macro” data, are described. If this hypothesis is accepted, there will be no aggregation bias. Finally, the estimation procedure and the “micro-test” for aggregation bias are applied in the analysis of annual investment data, 1935–1954, for two firms.

7,637 citations

Book
01 Jan 1970
TL;DR: In this article, the official journals of government are produced at their 1.5 million square foot plant, the largest industrial facility in the District and significant issues of outdated plant and equipment.
Abstract: • The official journals of government are produced at their 1.5 million square foot plant, the largest industrial facility in the District. There are significant issues of outdated plant and equipment, failure to meet performance metrics, environmental concerns, safety and security issues, and a significant reduction in staffing over the last decade with only relatively minor workforce development efforts.

5,907 citations

Journal ArticleDOI
TL;DR: Ebsco as mentioned in this paper focuses on additive and homogeneous production possibility frontiers that have played an important role in formulating statistical tests of the theory of production and characterizes the class of production possibility frontier that are homogeneous and additive.
Abstract: Focuses on additive and homogeneous production possibility frontiers that have played an important role in formulating statistical tests of the theory of production. Characterization of the class of production possibility frontiers that are homogenous and additive; Representation of the production possibility frontier; Statistical tests of the theory of production. (Из Ebsco)

2,619 citations

Book
01 Jan 1953
TL;DR: In this paper, the authors present a mathematical interpretation of the duality between cost and production function, and present a heuristic principle of minimum costs and a Cobb-Douglas production function.
Abstract: 1. The Process Production Function.- 2. Heuristic Principle of Minimum Costs.- 3. The Producer's Minimum Cost Function.- 4. Dual Determination of Production Function From Cost Function.- 5. Geometric Interpretation of the Duality Between Cost and Production Function.- 6. Constraints on the Factors of Production.- 7. Homothetic Production Functions.- 8. The Cobb-Douglas Production Function.- 9. The Problem of Aggregation.- 10. The Dynamics of Monopoly.

1,799 citations


"Economies of scale in U. S. electri..." refers background in this paper

  • ...This result, known as Shephard's lemma (Shephard 1953), is conveniently expressed in logarithmic form for the translog cost function as...

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Posted Content
TL;DR: In this paper, the authors discuss several of Takayama's criticisms in addition to showing that the so-called "A-J Effect" cannot be derived from the basic assumptions made by both Averch and Johnson and also present a new formulation which leads to the A-J result quoted above.
Abstract: A recent article by Akira Takayama discusses an earlier paper by Harvey Averch and Leland L. Johnson on fair rate of return regulation of public utilities. Although Takayama (p. 255) agrees with Averch and Johnson's general conclusions "that a firm will tend to increase its investment with the introduction of an active constraint" on its rate of return, he criticizes the A-J argument as being "confusing, ambiguous, and in error." Takayama then attempts a clarification, and presents a new formulation which leads to the A-J result quoted above. This comment will discuss several of Takayama's criticisms in addition to showing that the so-called "A-J Effect" cannot be derived from the basic assumptions made by both Averch and Johnson and Takayama.1 We will show that the very assumptions used to prove the A-J Effect, by defining the region of X, require an assumption that the A-J Effect exists in the first place.

1,609 citations