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Scale economies, technology and technical change in the water industry: Evidence from the English water only sector

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  • Bottasso, Anna
  • Conti, Maurizio

Abstract

In this paper we estimate a variable cost function to analyze cost economies and technical change in the English water only sector over the 1995-2005 period. We jointly model the impact on costs of output, customer numbers and area size which allows us to consider both the vertical and horizontal (spatial) dimensions of water utilities' operations. Estimates suggest the existence of unexploited economies of output and customer density and small scale economies which appear to be increasing with population density. These findings suggest that moderate cost savings from prudent mergers could be expected; in particular, benefits of merging water utilities might be higher in more densely populated urban areas. Finally, technical change is found to be increasing over the sample period.

Suggested Citation

  • Bottasso, Anna & Conti, Maurizio, 2009. "Scale economies, technology and technical change in the water industry: Evidence from the English water only sector," Regional Science and Urban Economics, Elsevier, vol. 39(2), pages 138-147, March.
  • Handle: RePEc:eee:regeco:v:39:y:2009:i:2:p:138-147
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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. repec:spr:waterr:v:31:y:2017:i:8:d:10.1007_s11269-016-1395-6 is not listed on IDEAS
    3. François Destandau & Serge Garcia, 2014. "Service quality, scale economies and ownership: an econometric analysis of water supply costs," Journal of Regulatory Economics, Springer, vol. 46(2), pages 152-182, October.
    4. Pointon, Charlotte & Matthews, Kent, 2016. "Dynamic efficiency in the English and Welsh water and sewerage industry," Omega, Elsevier, vol. 58(C), pages 86-96.
    5. Barbosa, Alexandro & Lima, Severino Cesário de & Brusca, Isabel, 2016. "Governance and efficiency in the Brazilian water utilities: A dynamic analysis in the process of universal access," Utilities Policy, Elsevier, vol. 43(PA), pages 82-96.
    6. 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.
    7. repec:eee:juipol:v:45:y:2017:i:c:p:97-108 is not listed on IDEAS
    8. Worthington, Andrew C. & Higgs, Helen, 2014. "Economies of scale and scope in Australian urban water utilities," Utilities Policy, Elsevier, vol. 31(C), pages 52-62.
    9. 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.
    10. repec:spr:waterr:v:31:y:2017:i:8:d:10.1007_s11269-016-1346-2 is not listed on IDEAS
    11. Lorenzo BARDELLI & Lorenzo ROBOTTI, 2009. "The water sector in Italy," CIRIEC Working Papers 0901, CIRIEC - Université de Liège.
    12. Bottasso, Anna & Conti, Maurizio & Piacenz, Massimiliano & Vannoni, Davide, 2011. "The appropriateness of the poolability assumption for multiproduct technologies: Evidence from the English water and sewerage utilities," International Journal of Production Economics, Elsevier, pages 112-117.
    13. Zschille, Michael, 2012. "Consolidating the Water Industry: An Analysis of the Potential Gains from Horizontal Integration in a Conditional Efficiency Framework," CEPR Discussion Papers 8737, C.E.P.R. Discussion Papers.
    14. 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.
    15. Subal Kumbhakar & Alan Horncastle, 2010. "Improving the econometric precision of regulatory models," Journal of Regulatory Economics, Springer, vol. 38(2), pages 144-166, October.
    16. Michael Zschille, 2014. "Nonparametric measures of returns to scale: an application to German water supply," Empirical Economics, Springer, vol. 47(3), pages 1029-1053, November.
    17. repec:kap:jproda:v:47:y:2017:i:3:d:10.1007_s11123-017-0496-4 is not listed on IDEAS
    18. Michael Zschille, 2014. "Marktstrukturen in der Trinkwasserversorgung," DIW Roundup: Politik im Fokus 43, DIW Berlin, German Institute for Economic Research.
    19. 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.
    20. Michael Zschille, 2016. "Cost Structure and Economies of Scale in German Water Supply," Discussion Papers of DIW Berlin 1576, DIW Berlin, German Institute for Economic Research.
    21. Maziotis, Alexandros & Saal, David S. & Thanassoulis, Emmanuel & Molinos-Senante, María, 2016. "Price-cap regulation in the English and Welsh water industry: A proposal for measuring productivity performance," Utilities Policy, Elsevier, vol. 41(C), pages 22-30.
    22. Pointon, Charlotte & Matthews, Kent, 2016. "Reprint of: Dynamic efficiency in the English and Welsh water and sewerage industry," Omega, Elsevier, vol. 60(C), pages 98-108.
    23. Anne-Kathrin Faust & Andrea Baranzini, 2014. "The economic performance of Swiss drinking water utilities," Journal of Productivity Analysis, Springer, vol. 41(3), pages 383-397, June.
    24. 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.
    25. 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.

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