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Incorporating water purification in efficiency evaluation: Evidence from Japanese water utilities

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  • Theara Horn

    ()
    (Graduate School of Economics, Osaka University)

Abstract

Water production and service quality have been used as dimensions of efficiency evaluation in previous studies of water utilitiesf performance. This study attempts to show that the inclusion of water purification efforts should be another crucial dimension in the efficiency measurement. We use a stochastic cost frontier to estimate the technical efficiency of 392 Japanese water utilities in 2005. The results show that a water purification effort may increase cost, and that its inclusion in efficiency evaluation leads to some specific changes in efficiency score and the ranking of water utilities. Furthermore, this incorporation enables the impact of different qualities of source water on efficiency to be controlled. The result suggests that in order to encourage water purification efforts, it is crucial to incorporate purification in benchmarking.

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Bibliographic Info

Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 09-40.

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Length: 15 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:osk:wpaper:0940

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Web page: http://www.econ.osaka-u.ac.jp/
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Keywords: Water utilities; Water purification; Stochastic Cost Frontier;

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  1. 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.
  2. 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.
  3. David Saal & David Parker & Tom Weyman-Jones, 2007. "Determining the contribution of technical change, efficiency change and scale change to productivity growth in the privatized English and Welsh water and sewerage industry: 1985–2000," Journal of Productivity Analysis, Springer, vol. 28(1), pages 127-139, October.
  4. 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.
  5. Lin, Chen, 2005. "Service quality and prospects for benchmarking: Evidence from the Peru water sector," Utilities Policy, Elsevier, vol. 13(3), pages 230-239, September.
  6. David S Saal & David Parker, 2000. "The impact of privatization and regulation on the water and sewerage industry in England and Wales: a translog cost function model," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 21(6), pages 253-268.
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