Drivers of Sustainable Infrastructure Investment in the Wastewater Sector: Dynamic Panel Data Evidence from Romania

This study investigates the complex interactions between operational and financial variables that influence infrastructure investment in Romania’s wastewater sector, a serious area for environmental sustainability and compliance with European environmental standards. Using a comprehensive dataset covering all regional water service operators, accounting for over 90% of the country’s population, across the period 2012–2022, the analysis employs dynamic panel data methods to examine how treated wastewater volumes, operating expenditures, revenues, tariffs and the number of connected users shape investment decisions and the modernization of wastewater infrastructure. The results reveal strong links between operational performance and investment behavior, indicating that revenues from wastewater services and efficiency in organic pollutant removal (CBO5) are key determinants of capital investment. The findings further show that an expanding user base generates substantial investment needs, supporting the extension and upgrading of wastewater treatment networks. By combining a dynamic econometric framework with a comprehensive national sample, the study makes an original contribution to the literature by providing robust empirical evidence on the interaction between financial performance, operational efficiency and sustainability objectives in the wastewater sector. The results underscore the importance of good financial planning, strategic management and sustainable investment policies, and offer relevant insights for policymakers, utility operators and researchers concerned with improving wastewater infrastructure performance under current economic and environmental challenges.