Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/191982
Authors: 
Hellwig, Michael
Schober, Dominik
Cabral, Luís
Year of Publication: 
2019
Series/Report no.: 
ZEW Discussion Papers 18-010
Abstract: 
We propose a difference-in-differences (DiD) approach to estimate the impact of incentives on cost reduction. We show theoretically, and estimate empirically, that German electricity distribution system operators (DSOs) pile up more costs in the year used to determine future prices when subject to a lower-powered regulation mechanism. The difference is particularly significant (about 10% of total cost) for firms in the upper quartile of the efficiency distribution, a pattern which is consistent with the pooling of types under the threat of ratcheting. In light of heterogeneous network reinforcement across DSOs due to local wind and solar power expansion, cost inflation will particularly hit already hard-struck DSOs’ customers.
Subjects: 
regulation
ratchet effect
electricity utilities
difference-in-differences
efficiency analysis
JEL: 
K23
L51
L94
L98
D24
D82
Document Type: 
Working Paper
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