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Spatial Integration Of Urban Water Services And Economies Of Scale

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  • Euijune Kim
  • Hyun Lee

Abstract

This research attempts to analyze economic effects of spatial integration of urban water service markets in Korea, employing the notion of economies of scale in terms of cost†effectiveness. The economies of scale are measured by the elasticity of supply with respect to the production cost from the translog cost function of urban water supply enterprises. It was found that the economies of scale in most urban water utility firms of Seoul Metropolitan region have continuously increased during the period 1989–1994. While the economies of scale would be hardly influenced by the changes in population density, they would tend to decrease marginally in response to the rise in employment density. If the urban water markets of the Seoul Metropolitan Region were consolidated into a single water service market without any changes to the current spatial network of water supply and regional economic attributes, the production cost would be reduced up to 47.1 percent of the actual cost in 1994. Those savings would be enough to make up for the financial deficit of the water production of the Seoul Metropolitan Region.

Suggested Citation

  • Euijune Kim & Hyun Lee, 1998. "Spatial Integration Of Urban Water Services And Economies Of Scale," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 10(1), pages 3-18, March.
    • Handle: RePEc:bla:revurb:v:10:y:1998:i:1:p:3-18
    DOI: 10.1111/j.1467-940X.1998.tb00084.x
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    Cited by:

    1. Carvalho, Pedro & Marques, Rui Cunha & Berg, Sanford, 2012. "A meta-regression analysis of benchmarking studies on water utilities market structure," Utilities Policy, Elsevier, vol. 21(C), pages 40-49.
    2. Céline Nauges & Caroline Berg, 2008. "Economies of density, scale and scope in the water supply and sewerage sector: a study of four developing and transition economies," Journal of Regulatory Economics, Springer, vol. 34(2), pages 144-163, October.
    3. Park, Sun-Young & Lee, Kyoung-Sil & Yoo, Seung-Hoon, 2016. "Economies of scale in the Korean district heating system: A variable cost function approach," Energy Policy, Elsevier, vol. 88(C), pages 197-203.
    4. Francisco González Gómez & Miguel Angel García Rubio, 2008. "Efficiency in the management of urban water services. What have we learned after four decades of research?," Hacienda Pública Española / Review of Public Economics, IEF, vol. 185(2), pages 39-67, July.
    5. Guerrini, Andrea & Romano, Giulia & Leardini, Chiara, 2018. "Economies of scale and density in the Italian water industry: A stochastic frontier approach," Utilities Policy, Elsevier, vol. 52(C), pages 103-111.
    6. NAUGES Céline & VAN DEN BERG Caroline, 2007. "How "natural" are natural monopolies in the water supply and sewerage sector? Case studies from developing and transition economies," LERNA Working Papers 07.05.226, LERNA, University of Toulouse.
    7. Fox, William F. & Gurley, Tami, 2006. "Will consolidation improve sub-national governments ?," Policy Research Working Paper Series 3913, The World Bank.
    8. Angel Prieto & José L. Zofio & Inmaculada Alvarez, 2009. "Economías de escala, densidad y alcance en la provisión pública de infraestructura básica municipal," Hacienda Pública Española / Review of Public Economics, IEF, vol. 190(3), pages 59-94, September.
    9. Andrea Guerrini & Giulia Romano & Bettina Campedelli, 2013. "Economies of Scale, Scope, and Density in the Italian Water Sector: A Two-Stage Data Envelopment Analysis Approach," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 27(13), pages 4559-4578, October.
    10. Jorge Guardiola & Francisco González-Gómez & Miguel A. García-Rubio, 2008. "Is the time dimension really important in research into contracting out?," FEG Working Paper Series 08/02, Faculty of Economics and Business (University of Granada).
    11. Yuxi Liu & Rizhao Gong & Wenzhong Ye & Changsheng Jin & Jianxin Tang, 2022. "Urban Spatial Structure and Water Ecological Footprint: Empirical Analysis of the Urban Agglomerations in China," Sustainability, MDPI, vol. 14(21), pages 1-14, October.
    12. Abbott, Malcolm & Cohen, Bruce, 2009. "Productivity and efficiency in the water industry," Utilities Policy, Elsevier, vol. 17(3-4), pages 233-244, September.
    13. Alexandr Akimov & Paul Simshauser, 2018. "Performance measurement in Australian water utilities: Current state and future directions," Discussion Papers in Finance finance:201802, Griffith University, Department of Accounting, Finance and Economics.
    14. Augusto Mercadier & Walter Cont & Gustavo Ferro, 2016. "Economies of scale in Peru’s water and sanitation sector," Journal of Productivity Analysis, Springer, vol. 45(2), pages 215-228, April.
    15. Nicola Tynan & Bill Kingdom, 2005. "Optimal Size for Utilities? Returns to Scale in Water: Evidence from Benchmarking," World Bank Publications - Reports 11235, The World Bank Group.

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