Production Costs, Inefficiency, and Source Water Quality: A Stochastic Cost Frontier Analysis of Canadian Water Utilities

James I. Price, Steven Renzetti, Diane Dupont, Wiktor Adamowicz and Monica B. Emelko

Land Economics, 2017, vol. 93, issue 1, 1-11

Abstract: This analysis employs a stochastic cost frontier to estimate relationships between source water quality, production costs, and cost efficiency in Canadian municipal water treatment facilities. Data for the analysis are obtained primarily from a census of water providers that contains detailed information on operational costs, source water quality, and treatment technologies. Results show water quality, as measured by turbidity, is a significant determinant of production costs. The estimated elasticity for turbidity is 0.1, with a 95% confidence interval of 0.06 to 0.14. We find no significant differences in cost efficiency across regions, treatment technologies, output, or turbidity levels.

JEL-codes: D24 Q53 (search for similar items in EconPapers)
Date: 2017
Note: DOI: doi:10.3368/le.93.1.1
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Citations: View citations in EconPapers (5)

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