2024/01/18 by Gugler, Klaus, Rammerstorfer, Margarethe, Schmitt, Stephan
paper · doi:10.57938/4a72635c-e119-4d6f-a5e8-71ff6056defe
This paper is the first to explicitly test for the presence of a trade-off between static and dynamic <br/>efficiency in a regulated industry, the electricity industry. We show for 16 European countries over the <br/>period 1998-2007 that higher electricity end-user prices in a country subsequently lead to higher <br/>investments in the capital stock, i.e. in generation, distribution and transmission assets. Moreover, <br/>there is a trade-off between vertical economies and competition. Ownership unbundling and forced <br/>access to the incumbent transmission grid increase competition but come at the cost of lost vertical <br/>economies. Generally, we find that regulation that affect only the market like the establishment of a <br/>wholesale market or free choice of suppliers increase investment activity via spurring competition. <br/>Regulation, however, that adversely affects the incumbent directly, like ownership unbundling, <br/>decreases aggregate investment spending. (author's abstract)