Using Supervised Environmental Composites in Production and Efficiency Analyses: An Application to Norwegian Electricity Networks

Luis Orea, Christian Growitsch, Tooraj Jamasb

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Although supervised dimension reduction methods have been extensively applied in different scientific fields, they have hardly ever been used in production economics. Nonetheless, these methods can also be useful in regulation of natural monopolies, where firms' cost and performance are affected by a large number of environmental factors. As economic theory suggests, at the presence of other relevant production or cost drivers, the traditional all-inclusive assumption is not satisfied. This paper shows that purging the data allows us to address this issue when analyzing the effect of weather and geography on efficiency in the context of the Norwegian electricity distribution networks.
Original languageEnglish
JournalCompetition and Regulation in Network Industries
Volume16
Issue number3
Pages (from-to)260-287
Number of pages28
ISSN1783-5917
DOIs
Publication statusPublished - Sep 2015
Externally publishedYes

Keywords

  • Electricity networks
  • Environmental conditions
  • Supervised composites

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