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Comparing the performance of public and private water companies in the Asia and Pacific region : what a stochastic costs frontier shows

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  • Estache, Antonio
  • Rossi, Martin A.

Abstract

Estache and Rossi estimate a stochastic costs frontier for a sample of Asian and Pacific water companies, comparing the performance of public and privatized companies based on detailed firm-specific information published by the Asian Development Bank in 1997. They find private operators of water companies to be more efficient than public operators. Costs in concessioned companies tend to be significantly lower than those in public companies. The authors show that rankings based on standard indicators are not always very consistent. This paper contributes to that growing literature. The rest of the paper is organized as follows. Section 2 presents the theoretical structure of the cost model estimated. Section 3 provides an overview of earlier studies of the water sector. Section 4 presents the estimates of costs frontiers obtained for a large sample of Asian and Pacific Region water companies, distinguishing between public and private operators. Section 5 compares the performance ranking from efficiency frontier measures to those obtained from productivity indicators. Section 6 concludes.

Suggested Citation

  • Estache, Antonio & Rossi, Martin A., 1999. "Comparing the performance of public and private water companies in the Asia and Pacific region : what a stochastic costs frontier shows," Policy Research Working Paper Series 2152, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2152
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    References listed on IDEAS

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    1. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
    2. Olson, Jerome A. & Schmidt, Peter & Waldman, Donald M., 1980. "A Monte Carlo study of estimators of stochastic frontier production functions," Journal of Econometrics, Elsevier, vol. 13(1), pages 67-82, May.
    3. Stevenson, Rodney E., 1980. "Likelihood functions for generalized stochastic frontier estimation," Journal of Econometrics, Elsevier, vol. 13(1), pages 57-66, May.
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    Cited by:

    1. François Destandau & Serge Garcia, 2014. "Service quality, scale economies and ownership: an econometric analysis of water supply costs," Journal of Regulatory Economics, Springer, vol. 46(2), pages 152-182, October.
    2. Kirkpatrick, Colin & Parker, David & Zhang, Yin-Fang, 2004. "State versus Private Sector Provision of Water Services in Africa: A Statistical, DEA and Stochastic Cost Frontier Analysis," Centre on Regulation and Competition (CRC) Working papers 30604, University of Manchester, Institute for Development Policy and Management (IDPM).
    3. Sauer, J.F., 2005. "“Efficiency Flooding”: Black-Box Frontiers and Policy Implications," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 2(1), pages 17-52.
    4. Philippe Marin, 2009. "Public-Private Partnerships for Urban Water Utilities : A Review of Experiences in Developing Countries," World Bank Publications, The World Bank, number 2703.
    5. Tsegai, Daniel W. & Linz, Teresa & Kloos, Julia, 2009. "Economic analysis of water supply cost structure in the Middle Olifants sub-basin of South Africa," Discussion Papers 49926, University of Bonn, Center for Development Research (ZEF).
    6. Kirkpatrick, Colin & Parker, David, 2004. "Regulation and the Privatisation of Water Services in Developing Countries: Assessing the Impact of the General Agreement on Trade in Services (GATS)," Centre on Regulation and Competition (CRC) Working papers 30600, University of Manchester, Institute for Development Policy and Management (IDPM).
    7. Sabbioni, Guillermo, 2008. "Efficiency in the Brazilian sanitation sector," Utilities Policy, Elsevier, vol. 16(1), pages 11-20, March.

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