Is Privatization Enough? Finding Performance Breaks for UK Power Plants

The literature shows that for most UK industries privatization might be necessary but is not sufficient to produce economic benefits. Often prior changes in management or later changes in market structure and regulation have larger impacts than privatization itself. We ask what changes around privatization had the greatest impact on efficiency for UK electricity generators. We analyse the effects of privatization and other changes in incentives on plant efficiency using a newly compiled unbalanced panel of about 60 plants for the years 1980 to 2004. We measure efficiency as input demands for two standard inputs, fuel and labour as well as three air emissions, CO2, SO2, and NOx. We model the change in efficiency as a single intercept break and allow for the break to occur at an unknown date. Inference for breaks and break dates relies on Quandt-Andrews type tests. We find breaks associated with efficiency increases for fuel and labour...