Incorporating water purification in efficiency evaluation: Evidence from Japanese water utilities

Theara Horn

No 09-40, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: Water production and service quality have been used as dimensions of efficiency evaluation in previous studies of water utilities f performance. This study attempts to show that the inclusion of water purification efforts should be another crucial dimension in the efficiency measurement. We use a stochastic cost frontier to estimate the technical efficiency of 392 Japanese water utilities in 2005. The results show that a water purification effort may increase cost, and that its inclusion in efficiency evaluation leads to some specific changes in efficiency score and the ranking of water utilities. Furthermore, this incorporation enables the impact of different qualities of source water on efficiency to be controlled. The result suggests that in order to encourage water purification efforts, it is crucial to incorporate purification in benchmarking.

Keywords: Water utilities; Water purification; Stochastic Cost Frontier (search for similar items in EconPapers)
JEL-codes: D24 H49 L51 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2009-12
New Economics Papers: this item is included in nep-eff
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Journal Article: Incorporating water purification in efficiency evaluation: evidence from Japanese water utilities (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:osk:wpaper:0940

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