Economies of Scale and Technical Efficiency in Community Water Systems

William Pizer, Winston Harrington, Jhih-Shyang Shih and Kenneth Gillingham

RFF Working Paper Series from Resources for the Future

Abstract: In this study we use datasets from the 1995 and 2000 Community Water Supply surveys to examine the production costs of water supply systems. We first estimate the economies of scale in water supply by estimating the total unit cost as well as individual component cost elasticities. For total unit cost elasticity, we find that a 1% increase in production reduces unit costs by a statistically significant 0.16%. For individual component cost elasticities, we find that higher economies of scale exist in capital costs, outside costs, other costs, and materials costs; labor costs and energy costs exhibit lower but still positive economies of scale. These economies of scale may reflect production economies or suggest that larger systems are better than smaller systems at bargaining and can obtain inputs at a lower unit cost. Importantly, bargaining gains and some production economies do not necessarily depend on water systems’ becoming physically interconnected.

Keywords: small water systems; water supply; capacity development; economies of scale; community water systems (search for similar items in EconPapers)
JEL-codes: Q25 Q28 (search for similar items in EconPapers)
Date: 2004-03-11
New Economics Papers: this item is included in nep-eff
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Citations: View citations in EconPapers (13)

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Working Paper: Economies of Scale and Technical Efficiency in Community Water Systems (2004)
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