Estimating potential economic savings of water utilities due to improvements on technical and allocative inefficiencies

Alexandros Maziotis, Ramon Sala-Garrido, Manuel Mocholi-Arce and Maria Molinos-Senante

Socio-Economic Planning Sciences, 2025, vol. 98, issue C

Abstract: This research investigated both technical and allocative inefficiencies in water utilities, and its impact on production costs. Using the stochastic frontier analysis (SFA) primal system, the study delved into the Chilean water sector between 2010 and 2017. Results showed an average technical inefficiency (TI) of 0.507 and allocative inefficiency (AI) of −0.417, indicating an overemphasis on capital over operational expenditures. The economic consequences of TI and AI were approximately US$ 1297 million and US$ 237 million per annum, respectively. On an individual scale, the increase on production costs due to TI and AI were estimated at 0.390 US$/m3, 0.471 US$/m3 and 0.038 US$/m3 for full private utilities, concessionary utilities and the public utility, respectively. The results of the study evidence the need for holistic efficiency assessments to avoid biased policymaking, illuminating the prevailing trend of favoring capital expenditures, and revealing potential economic benefits for consumers.

Keywords: Technical efficiency; Allocative efficiency; Production costs; Primal system; Water industry (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0038012124003422
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:soceps:v:98:y:2025:i:c:s0038012124003422

DOI: 10.1016/j.seps.2024.102142

Access Statistics for this article

Socio-Economic Planning Sciences is currently edited by Barnett R. Parker

More articles in Socio-Economic Planning Sciences from Elsevier
Bibliographic data for series maintained by Catherine Liu ().