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Cost Efficiency and Scale Economies of Japanese Water Utilities

Author

Listed:
  • Theara Horn

    (Graduate School of Economics, Osaka University)

  • Hitoshi Saito

    (Graduate School of Economics, Osaka University)

Abstract

With the data of 831 Japanese water utilities from 1999 to 2008, we used the stochastic cost frontier analysis with a true fixed-effect model in order to estimate the cost efficiency and scale economies. We found that cost inefficiency was approximately 37%. The economies of water delivery volume were observed and found to be remarkably higher for small water utilities than for large ones. Scale economies were also discovered in small water utilities; however, scale diseconomies are likely to be incurred in larger water utilities. The optimal supply population size of a water utility is estimated to be 85,658 consumers, with a water delivery volume of 15.7 million m3 and a network length of 522 km.

Suggested Citation

  • Theara Horn & Hitoshi Saito, 2011. "Cost Efficiency and Scale Economies of Japanese Water Utilities," Discussion Papers in Economics and Business 11-19, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:1119
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    File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/1119.pdf
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    Cited by:

    1. Ferro, Gustavo & Lentini, Emilio J. & Mercadier, Augusto C. & Romero, Carlos A., 2013. "Eficiencia en la prestación de agua y saneamiento y su vinculación con regiones, propiedad e independencia de los prestadores en Brasil [Efficiency in water and sanitation providers and its links w," MPRA Paper 48247, University Library of Munich, Germany.
    2. Michelle Phillips, 2013. "Inefficiency in Japanese water utility firms: a stochastic frontier approach," Journal of Regulatory Economics, Springer, vol. 44(2), pages 197-214, October.

    More about this item

    Keywords

    Cost Efficiency; Scale Economies; Optimal Size; Japanese Water Utilities;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • L38 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Policy
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

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