Estimation of the Return on Capital in Municipal Water Systems
AbstractSeventy–five small, municipal water systems are analyzed to determine if they employ the least–cost long–run capital stock, and if they minimize cost given the observed level of capital. The social cost of capital exceeds the estimated return on investment by more than four times, and actual production costs are 36 percent above minimum costs. Median capital stock inefficiency, due to overinvestment, is $70,500 per system, and median cost inefficiency is $24,300. Extrapolated to the seven thousand similar systems nationwide, the combined cost of these two types of inefficiency is $663.6 million per year.
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Bibliographic InfoArticle provided by National Tax Association in its journal National Tax Journal.
Volume (Year): 58 (2005)
Issue (Month): 4 (December)
Other versions of this item:
- Donald F. Vitaliano, 2003. "Estimation of the Return on Capital in Municipal Water Systems," Rensselaer Working Papers in Economics 0313, Rensselaer Polytechnic Institute, Department of Economics, revised Feb 2005.
- H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
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