Divestiture and productive efficiency in the U.S. Telecommunications Industry : Economics of telecommunications

Understanding changes in firm-level patterns of productive efficiency is a major area of research, the knowledge of how firms react to external forces sheds light on changes taking place within internal processes, and insights are gained as to whether public policies to alter firms' behavior have had an impact. An analysis is carried out to evaluate patterns in the productive efficiency of U.S. telecommunications firms, and to assess whether changes have taken place in the behavior of firms after industry restructuring. The productive efficiency of the local operating sector of the U.S. telecommunications industry is evaluated at six points in time : 1975, 1978, 1981, 1984, 1987 and 1990. Data envelopment analysis (DEA) is used, which permits disaggregated evaluation of firm-level performance. Substantial efficiency gains are noted over time, with such gains being particularly steep after the 1984 divestiture and deregulation of the industry, while the influence of several factors that may also impact on efficiency is shown to change over time.