| 6, 2003 | Estimating optimal scale and technical efficiency in the Italian gas distribution industry |
| authors |
Fabrizio
ERBETTA Luca RAPPUOLI |
| The Italian gas distribution industry presents a high degree of fragmentation. However, the tendency of the market during the period comprised between 1970 and 1998 points out a concentration process. The available evidence supports the thesis that the local distributors have undertaken a process of enlargement of their scale size. This raises the question about the characteristics of returns to scale for such operators as well as the optimal scale at which they should operate. Returns to scale are analysed by means of DEA (Data Envelopment Analysis) methodology. The finding points out that the output space along which DMUs attain a high level of scale efficiency is very spread, so indicating an unexpected returns to scale characterisation. Only for smallest units the technology shows increasing returns, but such effect get rapidly exhausted in favour of a regime of constant returns to scale. The main policy conclusion is that an improvement of productivity can be reached by an intensification of the merging process involving local distributors operating at small scale. In addition, the mentioned concentration process appears as an "attainable" objective since the critical dimension allowing the exploitation of positive returns to scale is quite small. |
| this page updated
01/25/2004 19:38