Estimating technical efficiency and allocative distortions of water companies: evidence from the English and Welsh water and sewerage industry

Molinos-Senante, Maria; Maziotis, Alexandros; Villegas, Andres

Abstract

Regulated water industries need to improve their technical efficiency and allocate their resources efficiently. This is the case of the water industry in England and Wales which was privatized in 1989, and the method of price cap regulation was implemented. This study uses an input distance function system approach to estimate the technical efficiency and distortions in the choice of input mixes for the English and Welsh water and sewerage companies (WaSCs) over the years 1991-2016. The results indicated that an average WaSC was 75.3% technically efficient which means that inputs could be reduced by 24.7% keeping the level of output constant. On average, the input mix was considered to be allocated inefficiently as there was an over-utilization of capital and other inputs relative to employment. Moreover, the low degree of substitutability among inputs implied that reducing allocative inefficiency could be costly. The findings of our study is of interest to policy makers who want to implement effective policies to improve efficiency in the water industry.

Más información

Título según WOS: Estimating technical efficiency and allocative distortions of water companies: evidence from the English and Welsh water and sewerage industry
Título de la Revista: ENVIRONMENTAL SCIENCE AND POLLUTION RESEARCH
Volumen: 27
Número: 28
Editorial: SPRINGER HEIDELBERG
Fecha de publicación: 2020
Página de inicio: 35174
Página final: 35183
DOI:

10.1007/s11356-020-09850-6

Notas: ISI