IDEAS home Printed from https://ideas.repec.org/a/pal/jorsoc/v62y2011i12p2173-2188.html
   My bibliography  Save this article

Productivity change in the water industry in England and Wales: application of the meta-Malmquist index

Author

Listed:
  • M C A S Portela

    (Portuguese Catholic University, Porto, Portugal)

  • E Thanassoulis

    (Aston Business School, Aston University, UK)

  • A Horncastle

    (Oxera, UK)

  • T Maugg

    (Oxera, UK)

Abstract

This paper uses a meta-Malmquist index for measuring productivity change of the water industry in England and Wales and compares this to the traditional Malmquist index. The meta-Malmquist index computes productivity change with reference to a meta-frontier, it is computationally simpler and it is circular. The analysis covers all 22 UK water companies in existence in 2007, using data over the period 1993–2007. We focus on operating expenditure in line with assessments in this field, which treat operating and capital expenditure as lacking substitutability. We find important improvements in productivity between 1993 and 2005, most of which were due to frontier shifts rather than catch up to the frontier by companies. After 2005, the productivity shows a declining trend. We further use the meta-Malmquist index to compare the productivities of companies at the same and at different points in time. This shows some interesting results relating to the productivity of each company relative to that of other companies over time, and also how the performance of each company relative to itself over 1993–2007 has evolved. The paper is grounded in the broad theory of methods for measuring productivity change, and more specifically on the use of circular Malmquist indices for that purpose. In this context, the contribution of the paper is methodological and applied. From the methodology perspective, the paper demonstrates the use of circular meta-Malmquist indices in a comparative context not only across companies but also within company across time. This type of within-company assessment using Malmquist indices has not been applied extensively and to the authors’ knowledge not to the UK water industry. From the application perspective, the paper throws light on the performance of UK water companies and assesses the potential impact of regulation on their performance. In this context, it updates the relevant literature using more recent data.

Suggested Citation

  • M C A S Portela & E Thanassoulis & A Horncastle & T Maugg, 2011. "Productivity change in the water industry in England and Wales: application of the meta-Malmquist index," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 62(12), pages 2173-2188, December.
    • Handle: RePEc:pal:jorsoc:v:62:y:2011:i:12:p:2173-2188
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/jors/journal/v62/n12/pdf/jors201117a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: http://www.palgrave-journals.com/jors/journal/v62/n12/full/jors201117a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

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

    Other versions of this item:

    References listed on IDEAS

    as
    1. Pastor, Jesus T. & Lovell, C.A. Knox, 2005. "A global Malmquist productivity index," Economics Letters, Elsevier, vol. 88(2), pages 266-271, August.
    2. Ray, Subhash C & Desli, Evangelia, 1997. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries: Comment," American Economic Review, American Economic Association, vol. 87(5), pages 1033-1039, December.
    3. Portela, Maria C.A.S. & Thanassoulis, Emmanuel, 2010. "Malmquist-type indices in the presence of negative data: An application to bank branches," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1472-1483, July.
    4. repec:bla:scandj:v:94:y:1992:i:0:p:s211-28 is not listed on IDEAS
    5. 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.
    6. Henry Tulkens & Philippe Eeckaut, 2006. "Nonparametric Efficiency, Progress and Regress Measures For Panel Data: Methodological Aspects," Springer Books, in: Parkash Chander & Jacques Drèze & C. Knox Lovell & Jack Mintz (ed.), Public goods, environmental externalities and fiscal competition, chapter 0, pages 395-429, Springer.
    7. 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.
    8. Christopher O’Donnell & D. Rao & George Battese, 2008. "Metafrontier frameworks for the study of firm-level efficiencies and technology ratios," Empirical Economics, Springer, vol. 34(2), pages 231-255, March.
    9. Fare, Rolf & Shawna Grosskopf & Mary Norris & Zhongyang Zhang, 1994. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries," American Economic Review, American Economic Association, vol. 84(1), pages 66-83, March.
    10. 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.
    11. 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.
    12. Maria Portela & Emmanuel Thanassoulis, 2006. "Malmquist Indexes Using a Geometric Distance Function (GDF). Application to a Sample of Portuguese Bank Branches," Journal of Productivity Analysis, Springer, vol. 25(1), pages 25-41, April.
    13. 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.
    14. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity," Econometrica, Econometric Society, vol. 50(6), pages 1393-1414, November.
    15. John K. Ashton, 2000. "Total Factor Productivity Growth and Technical Change in the Water and Sewerage Industry," The Service Industries Journal, Taylor & Francis Journals, vol. 20(4), pages 121-130, October.
    16. George E. Battese & D. S. Prasada Rao, 2002. "Technology Gap, Efficiency, and a Stochastic Metafrontier Function," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 1(2), pages 87-93, August.
    17. Dyson, R. G. & Allen, R. & Camanho, A. S. & Podinovski, V. V. & Sarrico, C. S. & Shale, E. A., 2001. "Pitfalls and protocols in DEA," European Journal of Operational Research, Elsevier, vol. 132(2), pages 245-259, July.
    18. 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.
    19. Rikard Althin, 2001. "Measurement of Productivity Changes: Two Malmquist Index Approaches," Journal of Productivity Analysis, Springer, vol. 16(2), pages 107-128, September.
    20. Jesús Pastor & C. Lovell, 2007. "Circularity of the Malmquist productivity index," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(3), pages 591-599, December.
    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. Portela, Maria C.A.S. & Thanassoulis, Emmanuel, 2010. "Malmquist-type indices in the presence of negative data: An application to bank branches," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1472-1483, July.
    2. Abbott, Malcolm & Cohen, Bruce, 2009. "Productivity and efficiency in the water industry," Utilities Policy, Elsevier, vol. 17(3-4), pages 233-244, September.
    3. Mohsen Afsharian & Heinz Ahn, 2015. "The overall Malmquist index: a new approach for measuring productivity changes over time," Annals of Operations Research, Springer, vol. 226(1), pages 1-27, March.
    4. 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.
    5. Barnabé Walheer, 2022. "Global Malmquist and cost Malmquist indexes for group comparison," Journal of Productivity Analysis, Springer, vol. 58(1), pages 75-93, August.
    6. Afsharian, Mohsen & Ahn, Heinz & Harms, Sören Guntram, 2019. "Performance comparison of management groups under centralised management," European Journal of Operational Research, Elsevier, vol. 278(3), pages 845-854.
    7. 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.
    8. Giraleas, Dimitris & Emrouznejad, Ali & Thanassoulis, Emmanuel, 2012. "Productivity change using growth accounting and frontier-based approaches – Evidence from a Monte Carlo analysis," European Journal of Operational Research, Elsevier, vol. 222(3), pages 673-683.
    9. Aparicio, Juan & Ortiz, Lidia & Santín, Daniel, 2021. "Comparing group performance over time through the Luenberger productivity indicator: An application to school ownership in European countries," European Journal of Operational Research, Elsevier, vol. 294(2), pages 651-672.
    10. Shih-Liang Chao & Chun-Wei Lai, 2019. "Comparing the efficiency of alliance members and independent liner carriers: a metafrontier analysis," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 21(2), pages 157-172, June.
    11. Zabala-Iturriagagoitia, Jon Mikel & Aparicio, Juan & Ortiz, Lidia & Carayannis, Elias G. & Grigoroudis, Evangelos, 2021. "The productivity of national innovation systems in Europe: Catching up or falling behind?," Technovation, Elsevier, vol. 102(C).
    12. Pointon, Charlotte & Matthews, Kent, 2016. "Dynamic efficiency in the English and Welsh water and sewerage industry," Omega, Elsevier, vol. 58(C), pages 86-96.
    13. 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.
    14. Kao, Chiang & Liu, Shiang-Tai, 2016. "A parallel production frontiers approach for intertemporal efficiency analysis: The case of Taiwanese commercial banks," European Journal of Operational Research, Elsevier, vol. 255(2), pages 411-421.
    15. Aparicio, Juan & Santín, Daniel, 2024. "Global and local technical changes: A new decomposition of the Malmquist productivity index using virtual units," Economic Modelling, Elsevier, vol. 134(C).
    16. Molinos-Senante, María & Maziotis, Alexandros & Sala-Garrido, Ramón, 2014. "The Luenberger productivity indicator in the water industry: An empirical analysis for England and Wales," Utilities Policy, Elsevier, vol. 30(C), pages 18-28.
    17. Tourinho, Marco & Barbosa, Flávia & Santos, Paulo Rosa & Pinto, Francisco Taveira & Camanho, Ana S., 2023. "Productivity change in Brazilian water services: A benchmarking study of national and regional trends," Socio-Economic Planning Sciences, Elsevier, vol. 86(C).
    18. Zhiyong Li & Chen Feng & Ying Tang, 2022. "Bank efficiency and failure prediction: a nonparametric and dynamic model based on data envelopment analysis," Annals of Operations Research, Springer, vol. 315(1), pages 279-315, August.
    19. Lan-Bing Li & Cong-Cong Zhang & Jin-Li Hu & Ching-Ren Chiu, 2021. "Disaggregate productivity growth sources of regional industries in China," Empirical Economics, Springer, vol. 60(3), pages 1531-1557, March.
    20. Aparicio, Juan & López-Torres, Laura & Santín, Daniel, 2018. "Economic crisis and public education. A productivity analysis using a Hicks-Moorsteen index," Economic Modelling, Elsevier, vol. 71(C), pages 34-44.

    More about this item

    Statistics

    Access and download statistics

    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:pal:jorsoc:v:62:y:2011:i:12:p:2173-2188. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    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.