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Mean and Bold?

Author

Listed:
  • Kristof De Witte

    (University of Leuven)

  • Elbert Dijkgraaf

    (Erasmus University Rotterdam)

Abstract

See also the article 'Mean and bold: on separating merger economies from structural efficiency gains in the drinking water sector' 2010, The Journal of the Operational Research Society , 61, 222-34. The Dutch drinking water sector experienced two drastic changes over the last 10 years. Firstly, in 1997, the sector association started with a voluntary benchmarking aimed to increase the efficiency and effectiveness of the sector. Secondly, merger activity arose. This paper develops a tailored nonparametric model to dissect and distinguish the effects on efficiency of these two evolutions. In particular, we adapt Free Disposal Hull (FDH) to estimate robust and conditional non-oriented efficiency estimates. Parametric COLS (Fourier) tests show the robustness of the model with respect to the specification and its variables. We classify the merger economies into scale economies and increased incentives to fight inefficiencies. Although we detect a significant efficiency enhancing effect of benchmarking, we find insignificant merger economies due to the absence of scale economies and the absence of increased incentives to fight inefficiencies.

Suggested Citation

  • Kristof De Witte & Elbert Dijkgraaf, 2007. "Mean and Bold?," Tinbergen Institute Discussion Papers 07-092/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20070092
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    References listed on IDEAS

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    Cited by:

    1. Mande Buafua, Patrick, 2015. "Efficiency of urban water supply in Sub-Saharan Africa: Do organization and regulation matter?," Utilities Policy, Elsevier, vol. 37(C), pages 13-22.
    2. Jos L. T. Blank & Bert Enserink & Alex A. S. van Heezik, 2019. "Policy Reforms and Productivity Change in the Dutch Drinking Water Industry: A Time Series Analysis 1980–2015," Sustainability, MDPI, vol. 11(12), pages 1-14, June.
    3. Ferro, Gustavo & Lentini, Emilio & Mercadier, Augusto & Romero, Carlos A., 2010. "Retornos a escala en agua y saneamiento: estimaciones para América Latina [Returns to scale in water and sanitation: estimates for Latin Amercia]," MPRA Paper 20324, University Library of Munich, Germany, revised Jan 2010.
    4. De Witte, Kristof & Marques, Rui, 2009. "Gaming in a benchmarking environment. A non-parametric analysis of benchmarking in the water sector," MPRA Paper 14679, University Library of Munich, Germany.
    5. Kristof De Witte & Rui Marques, 2010. "Designing performance incentives, an international benchmark study in the water sector," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 18(2), pages 189-220, June.
    6. Ferro, Gustavo & Romero, Carlos A. & Covelli, María Paula, 2011. "Regulation and performance: A production frontier estimate for the Latin American water and sanitation sector," Utilities Policy, Elsevier, vol. 19(4), pages 211-217.

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    More about this item

    Keywords

    Mergers and acquisitions; efficiency; scale economies; water sector; non-parametric and parametric estimation;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D20 - Microeconomics - - Production and Organizations - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

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