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Effects of Privatization on Price and Labor Efficiency: The Swedish Electricity Distribution Sector

I examine the effects of privatization, in the form of acquisitions, in the Swedish electricity distribution sector. As the majority of the distribution networks have remained publicly owned, I use a synthetic control method to identify the effects on price and labor efficiency. In comparison to their synthetic counterparts, I find that the acquired networks increased labor efficiency by 8-18 percent depending on model specification, while no effect is found on price. Thus, the evidence suggests economically meaningful efficiency gains but that these are not fed through to consumer prices. Robustness results using a conventional difference-in-differences estimator largely confirms the results, although the estimated efficiency gains are either comparable to or less pronounced than their synthetic control counterparts.

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Keywords: Incentive regulation, Electricity distribution, Natural monopoly, Norm model regulation, Privatization, acquisitions

DOI: 10.5547/01956574.41.2.elun

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Published in Volume 41, Number 2 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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