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Water services in Italy: implementation of the reform and efficiency of providers

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  • Michele Benvenuti

    ()
    (Banca d'Italia)

  • Elena Gennari

    ()
    (Banca d'Italia)

Abstract

The paper investigates the organization of the Italian water sector in the light of the reforms of public utilities. The aim is to examine the degree of implementation of the water sector reform (the so-called Galli Law of 1994) and assess the performance of operators through a study of their financial indicators and a non-parametric efficiency analysis. The information sources include two Bank of Italy surveys carried out in 2007 on local public water authorities and local water service providers. Financial indicators point to a low return on equity: for more than half of the firms it is lower than the risk-free interest rate. The non-parametric efficiency analysis does not reveal significant economies of scope and highlights a certain degree of variability of technical efficiency scores. This suggests that there is room for efficiency gains through the introduction of comparative competitive mechanisms such as the yardstick competition.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Questioni di Economia e Finanza (Occasional Papers) with number 23.

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Date of creation: Sep 2008
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Handle: RePEc:bdi:opques:qef_23_08

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Keywords: water supply; data envelopment analysis; public utilities; natural monopoly; regulation;

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References

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  1. Jedidiah Brewer & Robert Glennon & Alan Ker & Gary D. Libecap, 2007. "Water Markets in the West: Prices, Trading, and Contractual Forms," NBER Working Papers 13002, National Bureau of Economic Research, Inc.
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  14. Paola Valbonesi & Chiara D'Alpaos, 2006. "Una valutazione delle ipotesi di revisione del Metodo tariffario normalizzato per il servizio idrico integrato," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2006(5-6), pages 97-125.
  15. Rajiv D. Banker & Richard C. Morey, 1986. "The Use of Categorical Variables in Data Envelopment Analysis," Management Science, INFORMS, vol. 32(12), pages 1613-1627, December.
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