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Author Info
Kristof De Witte () (University of Leuven)
Elbert Dijkgraaf () (Erasmus University Rotterdam)

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Abstract

The Dutch drinking water sector experienced two drastic changes over the last 10 years. Firstly, in 1997, the sector association started with a voluntary benchmarking aimed to increase the efficiency and effectiveness of the sector. Secondly, merger activity arose. This paper develops a tailored nonparametric model to dissect and distinguish the effects on efficiency of these two evolutions. In particular, we adapt Free Disposal Hull (FDH) to estimate robust and conditional non-oriented efficiency estimates. Parametric COLS (Fourier) tests show the robustness of the model with respect to the specification and its variables. We classify the merger economies into scale economies and increased incentives to fight inefficiencies. Although we detect a significant efficiency enhancing effect of benchmarking, we find insignificant merger economies due to the absence of scale economies and the absence of increased incentives to fight inefficiencies.

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Publisher Info
Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 07-092/3.

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Date of creation: 27 Nov 2007
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Handle: RePEc:dgr:uvatin:20070092

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Web page: http://www.tinbergen.nl/

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Related research
Keywords: Mergers and acquisitions; efficiency; scale economies; water sector; non-parametric and parametric estimation;

Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
D20 - Microeconomics - - Production and Organizations - - - General
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Charnes, A. & Cooper, W. W. & Golany, B. & Seiford, L. & Stutz, J., 1985. "Foundations of data envelopment analysis for Pareto-Koopmans efficient empirical production functions," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 91-107. [Downloadable!] (restricted)
  2. Kristof De Witte & Rui C. Marques, 2007. "Designing incenttives in local public utilities, an international comparison of the drinking water sector," Center for Economic Studies - Discussion papers ces0732, Katholieke Universiteit Leuven, Centrum voor Economische Studiën. [Downloadable!]
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    Other versions:
  5. Fumitoshi Mizutani & Takuya Urakami, 2001. "articles: Identifying network density and scale economies for Japanese water supply organizations," Papers in Regional Science, Springer, vol. 80(2), pages 211-230. [Downloadable!] (restricted)
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    Other versions:
  13. Greene, William H., 1980. "Maximum likelihood estimation of econometric frontier functions," Journal of Econometrics, Elsevier, vol. 13(1), pages 27-56, May. [Downloadable!] (restricted)
  14. Gugler, Klaus & Mueller, Dennis C. & Yurtoglu, B. Burcin & Zulehner, Christine, 2003. "The effects of mergers: an international comparison," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 625-653, May. [Downloadable!] (restricted)
    Other versions:
  15. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November. [Downloadable!] (restricted)
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  18. Ivaldi, Marc & Mccullough, Gerard, 2005. "Welfare Tradeoffs in U.S. Rail Mergers," IDEI Working Papers 344, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  19. Humphrey, David B. & Vale, Bent, 2004. "Scale economies, bank mergers, and electronic payments: A spline function approach," Journal of Banking & Finance, Elsevier, vol. 28(7), pages 1671-1696, July. [Downloadable!] (restricted)
  20. Paola Fabbri & Giovanni Fraquelli, 2000. "Costs and Structure of Technology in the Italian Water Industry," Empirica, Springer, vol. 27(1), pages 65-82, March. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. De Witte, Kristof & Marques, Rui, 2009. "Gaming in a benchmarking environment. A non-parametric analysis of benchmarking in the water sector," MPRA Paper 14679, University Library of Munich, Germany. [Downloadable!]
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