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Profit, Productivity and Price Performance Changes in The English and Welsh Water and Sewerage Companies

Author

Listed:
  • Alexandros Maziotis

    (Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Centre on Climate Change (CMCC))

  • David S. Saal

    (Aston University)

  • Emmanuel Thanassoulis

    (Aston University)

Abstract

The purpose of this paper is to assess the impact of regulation in the financial performance of the Water and Sewerage companies (WaSCs) in England and Wales. We apply a panel index approach across WaSCs over time to decompose unit-specific (temporal) index number based profitability growth as a function of the profitability, productivity and price performance growth achieved by benchmark firms, and the catch-up to the benchmark firm achieved by less productive firms. The results indicated that the steady decline in average price performance, gains in productivity and relatively stable economic profitability after 2000, suggest that Ofwat is now more focused on passing productivity benefits to consumers, and maintaining stable profitability than it was in earlier regulatory periods. This technique is of great interest for regulators to evaluate the effectiveness of regulation and companies to identify the determinants of profit change and improve future performance, even if sample sizes are limited.

Suggested Citation

  • Alexandros Maziotis & David S. Saal & Emmanuel Thanassoulis, 2012. "Profit, Productivity and Price Performance Changes in The English and Welsh Water and Sewerage Companies," Working Papers 2012.84, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2012.84
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    References listed on IDEAS

    as
    1. Robert J. Hill, 2004. "Constructing Price Indexes across Space and Time: The Case of the European Union," American Economic Review, American Economic Association, vol. 94(5), pages 1379-1410, December.
    2. John Salerian, 2003. "Analysing the Performance of Firms Using a Decomposable Ideal Index Number to Link Profit, Prices and Productivity," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 36(2), pages 143-155, June.
    3. Fox, Kevin J. & Grafton, R. Quentin & Kirkley, James & Squires, Dale, 2003. "Property rights in a fishery: regulatory change and firm performance," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 156-177, July.
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    5. 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.
    6. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "Multilateral Comparisons of Output, Input, and Productivity Using Superlative Index Numbers," Economic Journal, Royal Economic Society, vol. 92(365), pages 73-86, March.
    7. Tim Coelli & Denis Lawrence (ed.), 2006. "Performance Measurement and Regulation of Network Utilities," Books, Edward Elgar Publishing, number 3801.
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    Cited by:

    1. Alexandros Maziotis & David S. Saal & Emmanuel Thanassoulis, 2013. "Profit, Productivity, Price and Quality Performance Changes in the English and Welsh Water and Sewerage Companies," Working Papers 2013.15, Fondazione Eni Enrico Mattei.
    2. Maziotis, Alexandros & Saal, David S. & Thanassoulis, Emmanuel & Molinos-Senante, María, 2016. "Price-cap regulation in the English and Welsh water industry: A proposal for measuring productivity performance," Utilities Policy, Elsevier, vol. 41(C), pages 22-30.

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    More about this item

    Keywords

    Profit Decomposition; Productivity; Price Performance; Panel Index Numbers; Regulation; Water and Sewerage Industry;
    All these keywords.

    JEL classification:

    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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