Implications of Ownership, Regulation, and Market Structure for Performance: Evidence from the U.S. Electric Utility Industry Before and After the New Deal

Abstract

This study evaluates the impact of variations in regulation, ownership, and market structure in the U.S. electric utility industry during the period surrounding the New Deal, when considerable institutional variation provided a natural experiment for analysis. A simultaneous-equations model of electricity supply and demand is developed and estimated for the years 1930 and 1942 with firm- and market-level data collected on utilities serving cities of population 50,000 or more. The paper offers evidence that regulation, public ownership, and competition served to reduce electricity prices and enhance allocative efficiency during the period under examination. © 1997 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology