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Regularized conditional estimators of unit inefficiency in stochastic frontier analysis, with application to electricity distribution market

PublikationArtikel (med peer review)
Magnus Söderberg

Sammanfattning

In stochastic frontier analysis, the conventional estimation of unit inefficiency is based on the mean/mode of the inefficiency, conditioned on the composite error. It is known that the conditional mean of inefficiency shrinks towards the mean rather than towards the unit inefficiency. In this paper, we analytically prove that the conditional mode cannot accurately estimate unit inefficiency, either. We propose regularized estimators of unit inefficiency that restrict the unit inefficiency estimators to satisfy some a priori assumptions, and derive the closed form regularized conditional mode estimators for the three most commonly used inefficiency densities. Extensive simulations show that, under common empirical situations, e.g., regarding sample size and signal-to-noise ratio, the regularized estimators outperform the conventional (unregularized) estimators when the inefficiency is greater than its mean/mode. Based on real data from the electricity distribution sector in Sweden, we demonstrate that the conventional conditional estimators and our regularized conditional estimators provide substantially different results for highly inefficient companies.

The article can be accessed here.

Zeebari, Z., Månsson, K., Sjölander, P., & Söderberg, M. (2023). Regularized conditional estimators of unit inefficiency in stochastic frontier analysis, with application to electricity distribution market.Journal of Productivity Analysis, 59(1), 79-97.

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Norm-based feedback on household waste: Large-scale field experiments in two Swedish municipalities
Artikel (med peer review)Publikation
Ek, C. & Söderberg, M.
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Publiceringsår

2024

Publicerat i

Journal of Public Economics

Sammanfattning

We conduct two large-scale randomized controlled trials to produce the first evidence that Home Energy Report-type norm feedback letters can be used to reduce household waste. We explore several feedback variants, including a novel short-run dynamic norm that emphasizes ongoing changes in waste behavior. Waste reductions are on the order of 7%–12% for all treatments, substantially larger than usually found in the energy or water domains. Effects are mostly driven by increased recycling of packaging and remain largely intact a year after the intervention ended. Feedback is highly cost effective compared to alternative non-price waste policies. However, net social benefits depend on household preferences for receiving feedback, which we elicit in a valuation survey, and whether existing waste fees internalize the marginal social cost of waste.

Ratio Working Paper No. 372: Customers’ value-for-money for a regulated service across differen towners
Working paperPublikation
Biggar, D., & Söderberg, M. (2024). Customers’ value-for-money for a regulated service across different owners (Ratio Working Paper No. 372). Ratio.
Ladda ner
Publiceringsår

2024

Publicerat i

Ratio Working Paper Series.

Sammanfattning

What are the best ownership and governance arrangements for a natural monopoly facility? There are three broad approaches: (a) private ownership, coupled with arms-length public utility regulation; (b) some form of government (central, state, or local) ownership; and (c) customer or community ownership. While there is a substantial literature comparing outcomes under private and public (i.e., government) ownership, there is relatively little literature comparing private and/or government ownership with customer ownership. One of the obstacles of performance comparison is that different businesses may choose a different price-quality trade-off, making direct comparison impossible. In this study we cut through this problem by comparing customer perceptions of value-for-money. The study is based on interviews of more than 600 randomly selected electricity distribution customers in Sweden, approximately 150 in each ownership category (municipal, customer, private, and state). These distributors are subject to an identical regulatory framework. The results show that those owned directly by customers are perceived to deliver significantly more value for money than those owned by the government or by private investors. These results lend weight to the view that a well-governed customer-owned utility may lead to better outcomes than other owners.

Working Paper No. 367: The Impact of population size and bin structure on the cost of municipal solid waste: evidence from Sweden and Norway
Working paperPublikation
Söderberg, M., Sundriyal, V. K., & Gabrielsson, J.
Ladda ner
Publiceringsår

2023

Publicerat i

Ratio Working Paper Series

Sammanfattning

Increasing waste levels, combined with ambitious environmental targets, are exerting upward pressures on the cost for municipal solid waste in many countries. The purpose of this study is to investigate what municipalities can do to counteract this development. We collect information about population, cost and waste from 225 Swedish and Norwegian municipalities and empirically investigate how waste bin structure/type of waste collection system and population affect municipalities’ waste cost. Results indicate that 4-compartment bins is the most expensive bin structure (+13%) and using the same bin types in detached and multi-family dwellings leads to coordination savings (-18%). The cost minimising population is slightly above 600,000 inhabitants. Several of the surveyed municipalities have substantially fewer inhabitants than that and cost per inhabitant can be reduced by up to 30% in several locations through collaborations with larger neighbours. In Sweden, transferring the responsibility for solid waste from the municipalities (290 in total) to the regions (20 in total) would eliminate almost all scale inefficiencies.

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