Spatial Integration of Urban Water Services and Economies of Scale

Kim, Euijune; Lee, Hyun

doi:10.1111/j.1467-940x.1998.tb00084.x

Cited by 30 publications

(18 citation statements)

References 8 publications

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“…However, Torres and Morrison Paul (2006) observed economies of scale for small utilities but diseconomies of scale for the largest utilities. Similar results were obtained for other countries, including Italy (Fabbri and Fraquelli, 2000;Fraquelli and Giandrone, 2003;and Fraquelli and Moiso, 2005), France (Garcia and Thomas, 2001), Japan (Mizutani and Urakami, 2001), South Korea (Kim and Lee, 1998) and South Africa (Tsegai et al, 2009). Recently, Nauges and van den Berg (2008) found economies of scale in Colombia, Moldova and Vietnam for small and medium utilities but not in Brazil.…”

Section: Lessons From Literature: a Short Surveysupporting

confidence: 68%

A Meta-Regression Analysis of Benchmarking Studies on Water Utilities Market Structure

2011

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This paper updates the literature on water utility benchmarking studies carried out worldwide, focusing on scale and scope economies. Using meta-regression analysis, the study investigates which variables from published studies influence these economies. Our analysis led to several conclusions. The results indicate that there is a higher probability of finding diseconomies of scale and scope in large utilities; however, only the results for scale economies are significant. Diseconomies of scale and scope are more likely to be found in publicly-owned utilities than when the ownership is mostly private; as would be expected, multi-utilities are more likely to have scale and scope economies.

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Section: Lessons From Literature: a Short Surveysupporting

confidence: 68%

A Meta-Regression Analysis of Benchmarking Studies on Water Utilities Market Structure

2011

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“…This is confirmed by the negative estimator for SIZE when VRSTE is regressed: The high significance shows diseconomies of scale for pure technical efficiency in the wastewater sector. This evidence contrasts with research demonstrating economies of scale in water and/or wastewater sectors, at least to a certain threshold [22,30,[69][70][71][72]. For Italy, Romano and Guerrini [24] found that firms serving more than 50,000 customers achieve better performance than those serving a smaller population.…”

Section: Resultscontrasting

confidence: 41%

The Effects of Operational and Environmental Variables on Efficiency of Danish Water and Wastewater Utilities

Guerrini

Romano

Leardini

et al. 2015

Water

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Efficiency improvement is one of three patterns a public utility should follow in order to get funds for investments realization. The other two are recourse to bank loans or to private equity and tariff increase. Efficiency can be improved, for example, by growth and vertical integration and may be conditioned by environmental variables, such as customer and output density. Prior studies into the effects of these variables on the efficiency of water utilities do not agree on certain points (e.g., scale and economies of scope) and rarely consider others (e.g., density economies). This article aims to contribute to the literature by analysing the efficiency of water utilities in Denmark, observing the effects of operational and environmental variables. The method is based on two-stage Data Envelopment Analysis (DEA) applied to 101 water utilities. We found that the efficiency of the water sector was not affected by the observed variables, whereas that of wastewater was improved by smaller firm size, vertical integration strategy, and higher population density.

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“…Most economists in theory and practice assume considerable economies of scale in water production and supply [see, e.g., Kim and Lee , 1998; Bhattacharyya et al , 1995; Ewers et al , 2001; Scheele , 2000]. Nevertheless, no consensus exists with respect to the range of the production function over which such economies of scale do hold.…”

Section: Scale Elasticities and Optimum Sizementioning

confidence: 99%

Economies of scale and firm size optimum in rural water supply

Sauer

2005

Water Resources Research

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[1] This article is focused on modeling and analyzing the cost structure of watersupplying companies. A cross-sectional data set was collected with respect to water firms in rural areas of former East and West Germany. The empirical data are analyzed by applying a symmetric generalized McFadden (SGM) functional form. This flexible functional form allows for testing the concavity required by microeconomic theory as well as the global imposition of such curvature restrictions without any loss of flexibility. The original specification of the SGM cost function is modified to incorporate fixed factors of water production and supply as, for example, groundwater intake or the number of connections supplied. The estimated flexible and global curvature correct cost function is then used to derive scale elasticities as well as the optimal firm size. The results show that no water supplier in the sample produces at constant returns to scale. The optimal firm size was found to be on average about three times larger than the existing one. These findings deliver evidence for the hypothesis that the legally set supplying areas, oriented at public administrative criteria as well as local characteristics of water resources, are economically inefficient. Hence structural inefficiency in the rural water sector is confirmed to be policy induced.

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Spatial Integration of Urban Water Services and Economies of Scale

Cited by 30 publications

References 8 publications

A Meta-Regression Analysis of Benchmarking Studies on Water Utilities Market Structure

A Meta-Regression Analysis of Benchmarking Studies on Water Utilities Market Structure

The Effects of Operational and Environmental Variables on Efficiency of Danish Water and Wastewater Utilities

Economies of scale and firm size optimum in rural water supply

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