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Does Service Quality Matter In Measuring Performance Of Water Utilities?

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Author Info
Andrés J. Picazo-Tadeo () (Universitat de València. Dpto. Economía Aplicada II.)
Francisco J. Sáez-Fernández () (Universidad de Granada. Dpto. Economía Aplicada.)
Francisco González-Gómez () (Universidad de Granada. Dpto. Economía Aplicada.)

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Abstract

Quality is a dimension of water services that has been repeatedly omitted in the study of performance of water utilities. In this paper, we make use of Data Envelopment Analysis techniques (DEA) to compute both conventional quantity-based and quality-adjusted indicators of technical efficiency for a sample of Spanish water utilities. The key assumptions are that a lack of quality (bad quality) can be regarded as a bad output, and the existence of a trade-off between quantity and quality. Our main results indicate that quality matters in measuring technical performance, the difference between conventional and quality-adjusted evaluations representing the opportunity cost of maintaining quality. Averages and distribution functions significantly differ between both assessments of performance, although water utilities do not seem to rank differently.

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File URL: http://www.ugr.es/~teoriahe/RePEc/gra/fegper/FEGWP407.pdf
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Publisher Info
Paper provided by Faculty of Economics and Business (University of Granada) in its series FEG Working Paper Series with number 07/04.

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Length: 32 pages
Date of creation: 22 Nov 2007
Date of revision:
Handle: RePEc:gra:fegper:07/04

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Related research
Keywords: water utilities; quality; Data Envelopment Analysis.;

Find related papers by JEL classification:
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis

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  1. Corton, Maria Luisa, 2003. "Benchmarking in the Latin American water sector: the case of Peru," Utilities Policy, Elsevier, vol. 11(3), pages 133-142, September. [Downloadable!] (restricted)
  2. Fare, Rolf & Knox Lovell, C. A., 1978. "Measuring the technical efficiency of production," Journal of Economic Theory, Elsevier, vol. 19(1), pages 150-162, October. [Downloadable!] (restricted)
  3. M. A. García-Valiñas & M. A. Muñiz, 2007. "Is DEA useful in the regulation of water utilities? A dynamic efficiency evaluation (a dynamic efficiency evaluation of water utilities)," Applied Economics, Taylor and Francis Journals, vol. 39(2), pages 245-252, February. [Downloadable!] (restricted)
  4. Ashton, John K, 2000. "Cost Efficiency in the UK Water and Sewerage Industry," Applied Economics Letters, Taylor and Francis Journals, vol. 7(7), pages 455-58, July. [Downloadable!] (restricted)
  5. Saal, David S & Parker, David, 2001. "Productivity and Price Performance in the Privatized Water and Sewerage Companies of England and Wales," Journal of Regulatory Economics, Springer, vol. 20(1), pages 61-90, July. [Downloadable!] (restricted)
  6. Thanassoulis, Emmanuel, 2000. "The use of data envelopment analysis in the regulation of UK water utilities: Water distribution," European Journal of Operational Research, Elsevier, vol. 126(2), pages 436-453, October. [Downloadable!] (restricted)
  7. Olesen, O. B. & Petersen, N. C., 1995. "Incorporating quality into data envelopment analysis: a stochastic dominance approach," International Journal of Production Economics, Elsevier, vol. 39(1-2), pages 117-135, April. [Downloadable!] (restricted)
  8. 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)
  9. Picazo-Tadeo, Andres J. & Reig-Martinez, Ernest & Hernandez-Sancho, Francesc, 2005. "Directional distance functions and environmental regulation," Resource and Energy Economics, Elsevier, vol. 27(2), pages 131-142, June. [Downloadable!] (restricted)
  10. Cubbin, John, 2005. "Efficiency in the water industry," Utilities Policy, Elsevier, vol. 13(4), pages 289-293, December. [Downloadable!] (restricted)
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