China’s power grid sector, which combines transmission and distribution, has grown rapidly after the restructuring reform in 2002. We evaluate the scale effect in the sector by employing a parametric Malmquist index based on a heteroscedastic true fixed-effects stochastic frontier model to estimate technical efficiency and total factor productivity for China’s 30 grid companies from 2002 to 2017. The results show that there exists a scale effect. Most companies exhibit increasing returns to scale, total factor productivity experiences a significant growth driven by scale expansion. Companies with different scales should take differentiated actions to meet the challenges of market-oriented reform.

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Utilities Policy
Department of Econometrics

Ni, K.K., Xie, B.C., O'Neill, E., & Li, H.Z. (2021). The scale effect in China's power grid sector from the perspective of malmquist total factor productivity analysis. Utilities Policy, 69. doi:10.1016/j.jup.2021.101187