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Capturing the environment, a metafrontier approach to the drinking water sector

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  • De Witte, Kristof
  • Marques, Rui C.

Abstract

Environmental factors add complexity to the comparison between specific activities or entire entities. Decision making units with an inferior performance are tempted to invoke that their organization is different from the others in the data set. By reinterpreting and extending the metafrontier literature, we propose an all-embracing concept to fully capture the operational environment. We suggest the ‘Group Specific Technical Efficiency’ as a new measure to assess the overall efficiency of a utility while allowing for environmental differences. A real-world example of drinking water utilies out of 5 different countries illustrates the concept. JEL Classification: C14, C61, D24, L95

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Bibliographic Info

Paper provided by Katholieke Universiteit Leuven in its series Open Access publications from Katholieke Universiteit Leuven with number urn:hdl:123456789/158171.

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Date of creation: Jan 2008
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Handle: RePEc:ner:leuven:urn:hdl:123456789/158171

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Web page: http://www.kuleuven.be

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Keywords: Free Disposal Hull; Efficiency Measurement; Environmental Variables; Metafrontier; Water Industry;

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References

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  1. Tupper, Henrique Cesar & Resende, Marcelo, 2004. "Efficiency and regulatory issues in the Brazilian water and sewage sector: an empirical study," Utilities Policy, Elsevier, vol. 12(1), pages 29-40, March.
  2. De Witte, Kristof & Marques, R, 2007. "Designing incentives in local public utilities, an international comparison of the drinking water sector," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/175405, Katholieke Universiteit Leuven.
  3. Kim Woodbury & Brian Dollery, 2004. "Efficiency Measurement in Australian Local Government: The Case of New South Wales Municipal Water Services," Review of Policy Research, Policy Studies Organization, vol. 21(5), pages 615-636, 09.
  4. Cazals, Catherine & Florens, Jean-Pierre & Simar, Léopold, 2002. "Nonparametric Frontier Estimation: A Robust Approach," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
  5. George Battese & D. Rao & Christopher O'Donnell, 2004. "A Metafrontier Production Function for Estimation of Technical Efficiencies and Technology Gaps for Firms Operating Under Different Technologies," Journal of Productivity Analysis, Springer, vol. 21(1), pages 91-103, January.
  6. Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January.
  7. Christopher O’Donnell & D. Rao & George Battese, 2008. "Metafrontier frameworks for the study of firm-level efficiencies and technology ratios," Empirical Economics, Springer, vol. 34(2), pages 231-255, March.
  8. George E. Battese & D. S. Prasada Rao, 2002. "Technology Gap, Efficiency, and a Stochastic Metafrontier Function," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 1(2), pages 87-93, August.
  9. Silva Portela, Maria Conceicao A. & Thanassoulis, Emmanuel, 2001. "Decomposing school and school-type efficiency," European Journal of Operational Research, Elsevier, vol. 132(2), pages 357-373, July.
  10. C. Lovell, 2003. "The Decomposition of Malmquist Productivity Indexes," Journal of Productivity Analysis, Springer, vol. 20(3), pages 437-458, November.
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Cited by:
  1. Kristof Witte & David Saal, 2010. "Is a little sunshine all we need? On the impact of sunshine regulation on profits, productivity and prices in the Dutch drinking water sector," Journal of Regulatory Economics, Springer, vol. 37(3), pages 219-242, June.
  2. De Witte, Kristof & Kortelainen, Mika, 2008. "Blaming the exogenous environment? Conditional efficiency estimation with continuous and discrete environmental variables," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/211063, Katholieke Universiteit Leuven.
  3. De Witte, K. & Maassen van den Brink, H. & Groot, W., 2010. "The efficiency of education in generating literacy: a stochastic frontier approach," Working Papers 30, Top Institute for Evidence Based Education Research.
  4. Graziano Abrate & Fabrizio Erbetta & Giovanni Fraquelli, 2011. "Public utility planning and cost efficiency in a decentralized regulation context: the case of the Italian integrated water service," Journal of Productivity Analysis, Springer, vol. 35(3), pages 227-242, June.
  5. Steven Renzetti & Diane P. Dupont, 2009. "Measuring the Technical Efficiency of Municipal Water Suppliers: The Role of Environmental Factors," Land Economics, University of Wisconsin Press, vol. 85(4), pages 627-636.
  6. Shinji Yane & Sanford Berg, 2013. "Sensitivity analysis of efficiency rankings to distributional assumptions: applications to Japanese water utilities," Applied Economics, Taylor and Francis Journals, vol. 45(17), pages 2337-2348, June.

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