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Tradeoff Between Economies Of Size In Treatment And Diseconomies Of Distribution For Rural Water Systems


  • Boisvert, Richard N.
  • Schmit, Todd M.


This paper outlines a method to determine the tradeoff between economies of size in water treatment and diseconomies of distribution. Cost equations are estimated for several treatment technologies and distribution extensions. Empirical results are used to identify optimal system size where average total costs are minimized. Regardless of treatment, most costs are due to distribution. As water systems expand service territories, only in the most densely populated areas would remaining economies of size in treatment outweigh the diseconomies in distribution.

Suggested Citation

  • Boisvert, Richard N. & Schmit, Todd M., 1997. "Tradeoff Between Economies Of Size In Treatment And Diseconomies Of Distribution For Rural Water Systems," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 26(2), October.
  • Handle: RePEc:ags:arerjl:31572

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    References listed on IDEAS

    1. Ford, J L & Warford, J J, 1969. "Cost Functions for the Water Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 18(1), pages 53-63, November.
    2. Schmit, Todd M. & Boisvert, Richard N., 1996. "Rural Utilities Service's Water and Waste Disposal Loan and Grant Program and its Contribution to Small Public Water System Improvements in New York State," Research Bulletins 122990, Cornell University, Department of Applied Economics and Management.
    3. Christensen, Laurits R & Greene, William H, 1976. "Economies of Scale in U.S. Electric Power Generation," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 655-676, August.
    4. Boisvert, Richard N. & Schmit, Todd M., 1996. "Distribution Of Community Water Systems Across The United States With Emphasis On Size, Water Production, Ownership, And Treatment," Research Bulletins 122989, Cornell University, Department of Applied Economics and Management.
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    Cited by:

    1. Woods, Bethany & Deaton, B. James, 2014. "Do Water Service Provision Contracts with Neighbouring Population Centres Reduce Drinking Water Risk on Canadian Reserves?," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 171166, Agricultural and Applied Economics Association.
    2. Tsao, Leo & Schmit, Todd M. & Boisvert, Richard N., 1998. "Effects of Amendments to the Safe Drinking Water Act on Local Government Finance and Rural Residents in New York," Working Papers 179377, Cornell University, Department of Applied Economics and Management.
    3. Steven Renzetti, 1999. "Municipal Water Supply and Sewage Treatment: Costs, Prices and Distortions," Canadian Journal of Economics, Canadian Economics Association, vol. 32(3), pages 688-704, May.
    4. Fox, William F. & Gurley, Tami, 2006. "Will consolidation improve sub-national governments ?," Policy Research Working Paper Series 3913, The World Bank.

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