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Economies of scope and scale in the Norwegian electricity industry

Professor Subal C. Kumbhakar from the State University of New York, will present at the UiS Business School Wednesday Seminar-series his paper titled: Economies of scope and scale in the Norwegian electricity industry

We welcome all intterested to attend the UiS Business School Wednesday Seminar December 11 at Elise Ottesen-Jensens hus, EOJ 276/277 at 12:15-13:15.

Professor Subal C. Kumbhakar, Department of Economics, State University of New York – Binghamton, Binghamton, NY and professor II at the UiS Business School will present his paper titled: Economies of scope and scale in the Norwegian electricity industry.

Abstract:
An important issue for multi-product firms to consider is economies of scope, i.e., whether there is any benefit from producing two or more products, or whether specializing in producing only one product would be less costly. We examined the economies of scope for Norwegian electricity companies because policy makers have decided to force companies that both generates and distributes electricity to split their operations into two companies, one engaged in generation only and the other in distribution only. We set out to test the validity of the policy makers decision on unbundling generation and distribution. Using data from Norwegian electricity companies for the period 2004 – 2014, we found evidence of economies of scope, meaning that policy makers’ insistence on separating generation and distribution companies will have increased costs. We also found evidence of economies of scale, meaning that there are cost savings in expanding outputs. Our findings provide important information to consider in future

policy decisions in the Norwegian electricity industry, probably with implications for other countries.

Keywords: Cost function, Economies of scope, Economies of scale, Flexible technology

Professor Subal C. Kumbhakar, Department of Economics, State University of New York – Binghamton

Professor Subal C. Kumbhakar, Department of Economics, State University of New York – Binghamton