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Policy Reforms and Productivity Change in the Dutch Drinking Water Industry: A Time Series Analysis 1980–2015

Jos Blank (), Bert Enserink () and Alex A. S. van Heezik ()
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Bert Enserink: Faculty Technology, Policy and Management, Delft University of Technology, P.O. Box 5015, 2600 GA Delft, The Netherlands
Alex A. S. van Heezik: Faculty Technology, Policy and Management, Delft University of Technology, P.O. Box 5015, 2600 GA Delft, The Netherlands

Sustainability, 2019, vol. 11, issue 12, 1-14

Abstract: In the last four decades, the Dutch drinking water industry has undergone two major policy reforms, namely the consolidation of the industry by stimulating mergers and the introduction of yardstick competition by applying benchmarks. This paper addresses the question of whether these two instruments have improved productivity. Productivity changes are derived from an estimated cost function. The effects of average scale as well as the introduction of a form of yardstick competition on productivity are formally tested. Estimation is conducted on the basis of time series data in the period 1980–2015. Industry consolidation has taken place over a long period of time. Yardstick competition was introduced in 1997 on a voluntary basis. It shows that total factor productivity was rather stable in the period 1980–1998. Since 1998, annual productivity growth has been substantial (about 0.6% on average). There was an obvious break point in 1998, providing clear evidence that the introduction of the benchmark instrument has affected productivity change. Moreover, there are various indications that benchmarking has also contributed to improving quality and sustainability. We could not find any empirical evidence for the hypothesis that consolidation of the industry has improved productivity.

Keywords: drinking water; policy reforms; benchmarking; scale economies; cost model; productivity change; time series (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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