The impact of privatization and regulation on the water and sewerage industry in England and Wales: a translog cost function model
After the ten Regional Water Authorities (RWAs) of England and Wales were privatized in November 1989, the successor Water and Sewerage Companies (WASCs) faced a new regulatory regime that was designed to promote economic efficiency while simultaneously improving drinking water and environmental quality. As legally mandated quality improvements necessitated a costly capital investment programme, the industry's economic regulator, the Office of Water Services (Ofwat), implemented a retail price index (RPI)+K pricing system, which was designed to compensate the WASCs for their capital investment programme while also encouraging gains in economic efficiency. In order to analyse jointly the impact of privatization, as well as the impact of increasingly stringent economic and environmental regulation on the WASCs' economic performance, this paper estimates a translog multiple output cost function model for the period 1985-1999. Given the significant costs associated with water quality improvements, the model is augmented to include the impact of drinking water quality and environmental quality on total costs. The model is then employed to determine the extent of scale and scope economies in the water and sewerage industry, as well as the impact of privatization and economic regulation on economic efficiency. Copyright © 2000 John Wiley & Sons, Ltd.
Volume (Year): 21 (2000)
Issue (Month): 6 ()
|Contact details of provider:|| Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Denny, Michael & Pinto, Cheryl, 1978. "An Aggregate Model with Multi-Product Technologies," Histoy of Economic Thought Chapters, in: Fuss, Melvyn & McFadden, Daniel (ed.), Production Economics: A Dual Approach to Theory and Applications, volume 2, chapter 9 McMaster University Archive for the History of Economic Thought.
- Sawkins, John W, 1996. "Balancing Multiple Interests in Regulation: An Event Study of the English and Welsh Water Industry," Journal of Regulatory Economics, Springer, vol. 9(3), pages 249-68, May.
- Parker, David, 1997. "Price cap regulation, profitability and returns to investors in the UK regulated industries," Utilities Policy, Elsevier, vol. 6(4), pages 303-315, December.
- repec:reg:rpubli:398 is not listed on IDEAS
- Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
- Sing, Merrile, 1987. "Are Combination Gas and Electric Utilities Multiproduct Natural Monopolies?," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 392-98, August.
- Narjess Boubakri & Jean-Claude Cosset, 1998. "The Financial and Operating Performance of Newly Privatized Firms: Evidence from Developing Countries," Journal of Finance, American Finance Association, vol. 53(3), pages 1081-1110, 06.
- Morana, Claudio & Sawkins, John W, 2000. "Regulatory Uncertainty and Share Price Volatility: The English and Welsh Water Industry's Periodic Price Review," Journal of Regulatory Economics, Springer, vol. 17(1), pages 87-100, January.
- Panzar, John C., 1989. "Technological determinants of firm and industry structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 1, pages 3-59 Elsevier.
- 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.
- H. Naci Mocan, 1995.
"Quality Adjusted Cost Functions for Child Care Centers,"
NBER Working Papers
5040, National Bureau of Economic Research, Inc.
- Mocan, H Naci, 1995. "Quality-Adjusted Cost Functions for Child-Care Centers," American Economic Review, American Economic Association, vol. 85(2), pages 409-13, May.
- Melvyn A. Fuss & Leonard Waverman, 1981. "Regulation and the Multiproduct Firm: The Case of Telecommunications in Canada," NBER Chapters, in: Studies in Public Regulation, pages 277-328 National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:21:y:2000:i:6:p:253-268. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.