The impact of regulation on input substitution and operating cost

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Date: July 1998
From: Southern Economic Journal(Vol. 65, Issue 1)
Publisher: Southern Economic Association
Document Type: Article
Length: 7,235 words

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Abstract :

The effect of rate-of-return regulation on input substitutability and operating cost was undertaken using data on 20 interstate natural gas pipelines covering the period 1977-87 and the Morishima elasticities of substitution (MES) as a measure. Results show that the MES was lower between two rate based inputs and when a non-rate-base input was made the alternative to a rate base input. On the other hand, the MES was higher when the alternative was the rate base input as against the non rate base input. Operating cost was found to increase by 16% with regulation.

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Source Citation   

Gale Document Number: GALE|A21034131