IDEAS home Printed from https://ideas.repec.org/a/eee/juipol/v17y2009i3-4p225-232.html
   My bibliography  Save this article

Quo vadis efficiency analysis of water distribution? A comparative literature review

Author

Listed:
  • Walter, Matthias
  • Cullmann, Astrid
  • von Hirschhausen, Christian
  • Wand, Robert
  • Zschille, Michael

Abstract

Recognizing the growing importance of scientific benchmarking in water distribution, we provide a comprehensive survey of the available literature. We begin with a discussion about the (limited) use of benchmarking in the regulation of UK water utilities, and then extend the analysis to regulated water sectors in other countries. We find no clear impact of public or private ownership; instead, the institutional settings appear to be a dominant driver of efficiency. Quality and structural variables are significant parameters; and water losses and population density are also important drivers. Analysis reveals that economies of scale only exist in fragmented water industries, whereas economies of density are omnipresent. We find evidence suggesting important economies of scope (e.g. between water and sewerage). Finally, we summarize the tensions that exist in attempting to measure efficiency in the water industry and draw conclusions about how to improve efficiency analysis in the future.

Suggested Citation

  • Walter, Matthias & Cullmann, Astrid & von Hirschhausen, Christian & Wand, Robert & Zschille, Michael, 2009. "Quo vadis efficiency analysis of water distribution? A comparative literature review," Utilities Policy, Elsevier, vol. 17(3-4), pages 225-232, September.
    • Handle: RePEc:eee:juipol:v:17:y:2009:i:3-4:p:225-232
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0957-1787(09)00025-3
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Antonio Estache & MartÌn A. Rossi, 2002. "How Different Is the Efficiency of Public and Private Water Companies in Asia?," The World Bank Economic Review, World Bank, vol. 16(1), pages 139-148, June.
    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. Johannes Sauer & Klaus Frohberg, 2007. "Allocative efficiency of rural water supply – a globally flexible SGM cost frontier," Journal of Productivity Analysis, Springer, vol. 27(1), pages 31-40, February.
    4. Antonio Estache & MartÌn A. Rossi & Christian A. Ruzzier, 2004. "The Case for International Coordination of Electricity Regulation: Evidence from the Measurement of Efficiency in South America," Journal of Regulatory Economics, Springer, vol. 25(3), pages 271-295, May.
    5. Corton, Maria Luisa, 2003. "Benchmarking in the Latin American water sector: the case of Peru," Utilities Policy, Elsevier, vol. 11(3), pages 133-142, September.
    6. Fumitoshi Mizutani & Takuya Urakami, 2001. "articles: Identifying network density and scale economies for Japanese water supply organizations," Papers in Regional Science, Springer;Regional Science Association International, vol. 80(2), pages 211-230.
    7. Tim Coelli & Antonio Estache & Sergio Perelman & Lourdes Trujillo, 2003. "A Primer on Efficiency Measurement for Utilities and Transport Regulators," World Bank Publications - Books, The World Bank Group, number 15149, December.
    8. 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.
    9. Youn Kim, H. & Clark, Robert M., 1988. "Economies of scale and scope in water supply," Regional Science and Urban Economics, Elsevier, vol. 18(4), pages 479-502, November.
    10. Picazo-Tadeo, Andres J. & Saez-Fernandez, Francisco J. & Gonzalez-Gomez, Francisco, 2008. "Does service quality matter in measuring the performance of water utilities," Utilities Policy, Elsevier, vol. 16(1), pages 30-38, March.
    11. M. A. Garcia-Valinas & M. A. Muniz, 2007. "Is DEA useful in the regulation of water utilities? A dynamic efficiency evaluation (a dynamic efficiency evaluation of water utilities)," Applied Economics, Taylor & Francis Journals, vol. 39(2), pages 245-252.
    12. Shih, Jhih-Shyang & Harrington, Winston & Pizer, William A. & Gillingham, Kenneth, 2004. "Economies of Scale and Technical Efficiency in Community Water Systems," Discussion Papers 10788, Resources for the Future.
    13. Bottasso, Anna & Conti, Maurizio, 2003. "Cost Inefficiency in the English and Welsh Water Industry: An Heteroskedastic Stochastic Cost Frontier Approach," Economics Discussion Papers 8872, University of Essex, Department of Economics.
    14. 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.
    15. Piacenza, Massimiliano & Vannoni, Davide, 2004. "Choosing among alternative cost function specifications: an application to Italian multi-utilities," Economics Letters, Elsevier, vol. 82(3), pages 415-422, March.
    16. Antonio Estache & Lourdes Trujillo, 2003. "Efficiency effects of "Privatization" in Argentina's Water and Sanitation Services," ULB Institutional Repository 2013/43978, ULB -- Universite Libre de Bruxelles.
    17. Massimo Filippini & Nevenka Hrovatin & Jelena Zorić, 2008. "Cost efficiency of Slovenian water distribution utilities: an application of stochastic frontier methods," Journal of Productivity Analysis, Springer, vol. 29(2), pages 169-182, April.
    18. Garcia, Serge & Moreaux, Michel & Reynaud, Arnaud, 2007. "Measuring economies of vertical integration in network industries: An application to the water sector," International Journal of Industrial Organization, Elsevier, vol. 25(4), pages 791-820, August.
    19. Stern, Jon, 2005. "UK regulatory price reviews and the role of efficiency estimates," Utilities Policy, Elsevier, vol. 13(4), pages 273-278, December.
    20. Colin Kirkpatrick & David Parker & Yin-Fang Zhang, 2006. "An Empirical Analysis of State and Private-Sector Provision of Water Services in Africa," The World Bank Economic Review, World Bank, vol. 20(1), pages 143-163.
    21. Thanassoulis, Emmanuel, 2000. "The use of data envelopment analysis in the regulation of UK water utilities: Water distribution," European Journal of Operational Research, Elsevier, vol. 126(2), pages 436-453, October.
    22. 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.
    23. Estache, Antonio & Kouassi, Eugene, 2002. "Sector organization, governance, and the inefficiency of African water utilities," Policy Research Working Paper Series 2890, The World Bank.
    24. Paola Fabbri & Giovanni Fraquelli, 2000. "Costs and Structure of Technology in the Italian Water Industry," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 27(1), pages 65-82, March.
    25. Anwandter, Lars & Ozuna, Teofilo Jr., 2002. "Can public sector reforms improve the efficiency of public water utilities?," Environment and Development Economics, Cambridge University Press, vol. 7(4), pages 687-700, October.
    26. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-332.
    27. Hunt, Lester C & Lynk, Edward L, 1995. "Privatisation and Efficiency in the UK Water Industry: An Empirical Analysis," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(3), pages 371-388, August.
    28. Greene, William, 2005. "Reconsidering heterogeneity in panel data estimators of the stochastic frontier model," Journal of Econometrics, Elsevier, vol. 126(2), pages 269-303, June.
    29. Cubbin, John & Tzanidakis, George, 1998. "Regression versus data envelopment analysis for efficiency measurement: an application to the England and Wales regulated water industry," Utilities Policy, Elsevier, vol. 7(2), pages 75-85, June.
    30. Cubbin, John, 2005. "Efficiency in the water industry," Utilities Policy, Elsevier, vol. 13(4), pages 289-293, December.
    31. Willam Greene, 2005. "Fixed and Random Effects in Stochastic Frontier Models," Journal of Productivity Analysis, Springer, vol. 23(1), pages 7-32, January.
    32. Thanassoulis, Emmanuel, 2000. "DEA and its use in the regulation of water companies," European Journal of Operational Research, Elsevier, vol. 127(1), pages 1-13, November.
    33. Antonioli, B. & Filippini, M., 2001. "The use of a variable cost function in the regulation of the Italian water industry," Utilities Policy, Elsevier, vol. 10(3-4), pages 181-187.
    34. 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.
    35. Serge Garcia & Alban Thomas, 2001. "The Structure of Municipal Water Supply Costs: Application to a Panel of French Local Communities," Journal of Productivity Analysis, Springer, vol. 16(1), pages 5-29, July.
    36. Dassler, Thoralf & Parker, David & Saal, David S., 2006. "Methods and trends of performance benchmarking in UK utility regulation," Utilities Policy, Elsevier, vol. 14(3), pages 166-174, September.
    37. Bhattacharyya, Arunava & Harris, Thomas R. & Narayanan, Rangesan & Raffiee, Kambiz, 1995. "Specification and estimation of the effect of ownership on the economic efficiency of the water utilities," Regional Science and Urban Economics, Elsevier, vol. 25(6), pages 759-784, December.
    38. Giovanni Fraquelli & Massimiliano Piacenza & Davide Vannoni, 2004. "Scope and scale economies in multi-utilities: evidence from gas, water and electricity combinations," Applied Economics, Taylor & Francis Journals, vol. 36(18), pages 2045-2057.
    39. 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.
    40. 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.
    41. Torres, Marcelo & Morrison Paul, Catherine J., 2006. "Driving forces for consolidation or fragmentation of the US water utility industry: A cost function approach with endogenous output," Journal of Urban Economics, Elsevier, vol. 59(1), pages 104-120, January.
    42. Mehdi Farsi & Aurelio Fetz & Massimo Filippini, 2008. "Economies of Scale and Scope in Multi-Utilities," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 123-144.
    43. Luis Orea & Subal C. Kumbhakar, 2004. "Efficiency measurement using a latent class stochastic frontier model," Empirical Economics, Springer, vol. 29(1), pages 169-183, January.
    44. Caudill, Steven B & Ford, Jon M & Gropper, Daniel M, 1995. "Frontier Estimation and Firm-Specific Inefficiency Measures in the Presence of Heteroscedasticity," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 105-111, January.
    45. Tim Coelli & Denis Lawrence (ed.), 2006. "Performance Measurement and Regulation of Network Utilities," Books, Edward Elgar Publishing, number 3801.
    46. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Picazo-Tadeo, Andres J. & Saez-Fernandez, Francisco J. & Gonzalez-Gomez, Francisco, 2008. "Does service quality matter in measuring the performance of water utilities," Utilities Policy, Elsevier, vol. 16(1), pages 30-38, March.
    3. 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.
    4. 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.
    5. Abbott, Malcolm & Cohen, Bruce, 2009. "Productivity and efficiency in the water industry," Utilities Policy, Elsevier, vol. 17(3-4), pages 233-244, September.
    6. 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.
    7. Saal David S. & Arocena Pablo & Maziotis Alexandros & Triebs Thomas, 2013. "Scale and Scope Economies and the Efficient Vertical and Horizontal Configuration of the Water Industry: A Survey of the Literature," Review of Network Economics, De Gruyter, vol. 12(1), pages 93-129, March.
    8. Michael Zschille & Matthias Walter, 2012. "The performance of German water utilities: a (semi)-parametric analysis," Applied Economics, Taylor & Francis Journals, vol. 44(29), pages 3749-3764, October.
    9. Picazo-Tadeo, Andrés J. & Sáez-Fernández, Francisco J. & González-Gómez, Francisco, 2008. "Assesing Performance in the Management of the Urban Water Cycle," Efficiency Series Papers 2008/01, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    10. Danelon, André F. & Spolador, Humberto F.S. & Kumbhakar, Subal C., 2021. "Weather and population size effects on water and sewer treatment costs: Evidence from Brazil," Journal of Development Economics, Elsevier, vol. 153(C).
    11. Michael Zschille, 2015. "Consolidating the water industry: an analysis of the potential gains from horizontal integration in a conditional efficiency framework," Journal of Productivity Analysis, Springer, vol. 44(1), pages 97-114, August.
    12. Mande Buafua, Patrick, 2015. "Efficiency of urban water supply in Sub-Saharan Africa: Do organization and regulation matter?," Utilities Policy, Elsevier, vol. 37(C), pages 13-22.
    13. Mellah, Thuraya & Ben Amor, Tawfik, 2016. "Performance of the Tunisian Water Utility: An input-distance function approach," Utilities Policy, Elsevier, vol. 38(C), pages 18-32.
    14. Jinjin Zhao, 2020. "Productivity change in the privatized water sector in China (1999–2006)," Journal of Productivity Analysis, Springer, vol. 53(2), pages 227-241, April.
    15. Miguel A. García-Rubio & Francisco González-Gómez & Jorge Guardiola, 2009. "Performance and ownership in the governance of urban water," FEG Working Paper Series 09/03, Faculty of Economics and Business (University of Granada).
    16. Romano, Giulia & Guerrini, Andrea, 2011. "Measuring and comparing the efficiency of water utility companies: A data envelopment analysis approach," Utilities Policy, Elsevier, vol. 19(3), pages 202-209.
    17. Ferro, Gustavo & Lentini, Emilio & Mercadier, Augusto & Romero, Carlos A., 2010. "Retornos a escala en agua y saneamiento: estimaciones para América Latina [Returns to scale in water and sanitation: estimates for Latin Amercia]," MPRA Paper 20324, University Library of Munich, Germany, revised Jan 2010.
    18. Michael Zschille, 2012. "Consolidating the Water Industry: An Analysis of the Potential Gains from Horizontal Integration in a Conditional Efficiency Framework," Discussion Papers of DIW Berlin 1187, DIW Berlin, German Institute for Economic Research.
    19. 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.
    20. 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.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:juipol:v:17:y:2009:i:3-4:p:225-232. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.sciencedirect.com/journal/utilities-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.