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Cost Inefficiency in the English and Welsh Water Industry: An Heteroskedastic Stochastic Cost Frontier Approach

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Author Info
Anna Bottasso ()
Maurizio Conti ()

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Abstract

In this study we analyze the evolution of operating cost inefficiency for the English and Welsh water industry over the period 1995-2001 by estimating an heteroskedastic stochastic variable cost frontier. The main aim of this paper is to provide an overall picture of the industry cost inefficiency, as we consider both the water and sewerage companies and the smaller water only companies. The main results of this paper are that industry operating cost inefficiency has decreased over the sample period and that inefficiency differentials among firms have steadily narrowed. This pattern of inefficiency might have been generated by the incentives provided by comparative and capital market competition which became fully operative after the 1994 price review.

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Paper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 573.

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Date of creation: 08 Dec 2003
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Handle: RePEc:esx:essedp:573

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  1. Fabrizio Erbetta & Martin Cave, 2007. "Regulation and Efficiency Incentives: Evidence from the England and Wales Water and Sewerage Industry," Review of Network Economics, Concept Economics, vol. 6(4), pages 425-452, December. [Downloadable!]
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