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Productivity Growth in the Electric Power Industry: A Comparative Study of Japan, The United States and Korea

PFM, Vol. 5 No. 3, (2005)

The purpose of this paper is to provide empirical estimates of total factor productivity (TFP) growth
rates in the electric power industry for the United States, Japan, and Korea. In this paper, the
conventional Divisia index number approach and two cost function approaches are used to assess
TFP growth rates during the 1972-1996 period. The TFP growth rates in the United States, where
regulatory reform has been progressing gradually since 1978, did not show much difference from
those in Japan, and were considerably lower than those achieved by Korea, where little reform has
taken place. Decomposition analysis based on the total cost function shows that the major sources of
TFP growth were the scale effect in Japan, the capacity utilization effect and the scale effect in Korea,
and technical change in the United States. Since the mid-80s, the increases in TFP growth were due
to improvements in the capacity utilization effect in all three countries.

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