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Allocative efficiency of rural water supply – a globally flexible SGM cost frontier

  • Johannes Sauer

    ()

  • Klaus Frohberg

This contribution investigates the efficiency of water suppliers in rural areas of East and West Germany. A non-radial measure of input specific allocative inefficiency is used to reduce the distributional dependency with respect to the inefficiency parameters. It is based on the demand system of a flexible cost function for the variable inputs labour, energy and chemicals modelled by applying a modified symmetric generalized McFadden functional form. Concavity restrictions, as required by economic theory, are imposed. The analysis reveals that efforts towards increasing suppliers’ allocative efficiency should focus on the relatively inefficient usage of the input chemicals. The input specific allocative model specification was found to be superior to the overall allocative specification. Copyright Springer Science+Business Media, LLC 2007

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File URL: http://hdl.handle.net/10.1007/s11123-006-0024-4
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Article provided by Springer in its journal Journal of Productivity Analysis.

Volume (Year): 27 (2007)
Issue (Month): 1 (February)
Pages: 31-40

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Handle: RePEc:kap:jproda:v:27:y:2007:i:1:p:31-40
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100296

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  1. Lau, Lawrence J., 1986. "Functional forms in econometric model building," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 26, pages 1515-1566 Elsevier.
  2. Bhattacharyya, Arunava & Harris, Thomas R. & Narayanan, Rangesan & Raffiee, Kambiz, 1995. "Technical Efficiency Of Rural Water Utilities," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 20(02), December.
  3. W. Erwin Diewert & T.J. Wales, 1989. "Flexible Functional Forms and Global Curvature Conditions," NBER Technical Working Papers 0040, National Bureau of Economic Research, Inc.
  4. Johannes Sauer, 2006. "Economic Theory and Econometric Practice: Parametric Efficiency Analysis," Empirical Economics, Springer, vol. 31(4), pages 1061-1087, November.
  5. Dimitris Christopoulos & John Loizides & Efthymios G. Tsionas, 2001. "Efficiency in European railways: Not as inefficient as one might think," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 63-88, May.
  6. Wang, Hung-jen & Schmidt, Peter, 2001. "One-step and two-step estimation of the effects of exogenous variables on technical efficiency levels," MPRA Paper 31075, University Library of Munich, Germany, revised Mar 2002.
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