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Strukturelle Ineffizienz im Wassersektor – Eine Empirische Analyse

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  • Johannes Sauer

Abstract

This article is focused on modeling and analysing the cost structure of water supplying companies. A cross-sectional data set was collected with respect to water firms in rural areas of East and West Germany. The empirical data is analysed by applying a symmetric generalized McFadden (SGM) functional form. This flexible functional form allows for testing the concavity required by microeconomic theory as well as the global imposition of such concavity restrictions without any loss of flexibility. The original specification of the SGM cost function is modified to incorporate fixed factors of water production and supply as e.g. groundwater intake or the number of connections supplied. The estimated flexible and global curvature correct cost function is then used to derive scale elasticities as well as the optimal firm size. The results show that no water supplier in the sample produces at constant returns to scale. The optimal firm size was found to be at average about three times higher than the existing one. These findings deliver evidence for the hypothesis that the legally set supplying areas – oriented at public administrative criteria as well as local characteristics of water resources – are economically inefficient. Hence structural inefficiency in the rural water sector is confirmed to be policy induced.

Suggested Citation

  • Johannes Sauer, 2005. "Strukturelle Ineffizienz im Wassersektor – Eine Empirische Analyse," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 125(3), pages 369-403.
  • Handle: RePEc:aeq:aeqsjb:v125_y2005_i3_q3_p369-403
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    More about this item

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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