Productivity Growth and Incentive Regulation in Austria’s Gas Distribution

Gugler K, Liebensteiner M (2019)

Publication Language: English

Publication Type: Journal article

Publication year: 2019


Book Volume: 134

Pages Range: 1-15

DOI: 10.1016/j.enpol.2019.110952


The projected rate of productivity growth is the critical determinant of the price cap in incentive regulation. However, the regulatory authorities generally lack sophisticated industry TFP studies to set an optimal cap. We thus estimate productivity growth in the Austrian gas distribution sector in a translog cost function framework. A key feature is our unique panel database on costs and outputs of regulated utilities for the period 2002–2013, covering six years prior and during incentive regulation as introduced in 2008. We find a modest TFP growth rate in the early sample years, followed by a decline to zero or even slightly negative rates in recent years. We also find a significant potential for returns to scale, which is left unexploited, indicating that utilities could significantly save on costs by merging. As essential investments have already been undertaken in the past, opportunities for technological progress seem to be limited in recent years

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Gugler, K., & Liebensteiner, M. (2019). Productivity Growth and Incentive Regulation in Austria’s Gas Distribution. Energy Policy, 134, 1-15.


Gugler, Klaus, and Mario Liebensteiner. "Productivity Growth and Incentive Regulation in Austria’s Gas Distribution." Energy Policy 134 (2019): 1-15.

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