"Sectoral Growth Drivers and Competitiveness in the European Union: Market Structure and Firm Level Indicators" (with M. O'Mahony, F. Peng, A. Rincon-Aznar and C. Robinson). Technical Report Commissioned by the European Commission. Published in M. Peneder (Eds.) (2009), "Sectoral Growth Drivers and Competitiveness in the European Union", pp. 455-492. [doi: 10.2769/55360]
This report reviews the economic performance and factors affecting it in all production sectors in the EU. The sector profile on electricity gas and water confirms that the sector has experienced exceptional job losses, averaging over 2% per annum between 1995 and 2004, and an oligopolistic degree of concentration of ownership. Along with transport and post and telecomms, it was one of the few sectors which performed better than the same sector in the USA, especially in respect of multi-factor productivity (MFP). This is in sharp contrast to the financial services sector, which showed almost no improvement in MFP over the period.
The report comments:
"Conversely, the EU outperforms theUS in the network industries of electricity, gas and water aswell as transport and telecommunications. In most of thesectors, MFP appears to be a decisive and consistent sourceof labour productivity growth. One striking observation,however, is the minor role that MFP growth plays in thegrowth of financial intermediation and business services,both thought to use technology intensively. If measuredcorrectly by national accounts (7), the data imply that thegrowth of output hardly matches the increased use oflabour and capital inputs in these sectors. This suggestsdeficits in the adoption of new technologies, whichdepends on complementary investments (e.g. in labourskills, organisational innovation, or new products) beforebecoming effective through cost reductions or increasedcustomer value." (p.13)
The sector profile reads:
Growth in electricity, gas and water supply sector was notimpressive in 1995–2004, but as employment plummeted,with one of the highest decreases among Europeanindustries, labour productivity rose substantially. Totalfactor productivity (TFP) rose more slowly. Net entry ratein the sector was rather high, while growth in both capitalservices and labour services indices was low. The industrywas characterised by large firms (ranking second acrossall industries) and relatively low competition as capturedby high HHI. On both of these indicators, France rankedespecially high (i.e. largest firms and highest HHI). Finally,regulatory impact index was one of the highest across allEuropean industries during 2000–2003.Government expenditure is an important driver of thegrowth as many of the firms in the industry are stateowned. Relative prices matter, but their influence is not assubstantial as in some other industries that depend on morediscretionary spending. In EU15, the industry is less volatilethan the overall economy, while in NMS10, it is roughlysimilar to the overall economy.Final consumption drives demand in EU15. Same is thecase for NMS10, but there intermediate consumption iseven more important. Government expenditure is ratherimportant to the EU15 electricity, gas and water supplyindustry." (p.594)