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The Impact of Regulation on Cost Efficiency: An Empirical Analysis of Wisconsin Water Utilities

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  • Cécile Aubert
  • Arnaud Reynaud

Abstract

The impact of regulation of efforts to minimize costs has been widely discussed, but remains difficult to measure. The sophisticated regulation of water utilities in Wisconsin allows us to attempt such on assessment since different firms can be under different regulatory regimes (price cap or rate-of-return) in the same geographical area at the same time. To measure the impact of regulation on efficiency, we use a stochastic cost frontier approach defining the unobservable efficiency of a water utility as a function of exogeneous variables. Using a panel of 211 water utilities observed from 1998 to 2000, we show that their efficiency scores can be partly explained by the regulatory framework. Copyright Springer Science+Business Media, Inc. 2005

Suggested Citation

  • Cécile Aubert & Arnaud Reynaud, 2005. "The Impact of Regulation on Cost Efficiency: An Empirical Analysis of Wisconsin Water Utilities," Journal of Productivity Analysis, Springer, vol. 23(3), pages 383-409, July.
    • Handle: RePEc:kap:jproda:v:23:y:2005:i:3:p:383-409
    DOI: 10.1007/s11123-005-2216-8
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    1. repec:ccp:journl:v:23:y:2003:i:5:p:137-149 is not listed on IDEAS
    2. Estache, Antonio & Rossi, Martin A., 2005. "Do regulation and ownership drive the efficiency of electricity distribution? Evidence from Latin America," Economics Letters, Elsevier, vol. 86(2), pages 253-257, February.
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