NDLI: Cost efficiency of Slovenian water distribution utilities: an application of stochastic frontier methods

Content Provider	Springer Nature Link
Author	Filippini, Massimo Hrovatin, Nevenka Zorić, Jelena
Copyright Year	2007
Abstract	This study estimates cost inefficiency and economies of scale of Slovenian water distribution utilities over the 1997–2003 period by employing several different stochastic frontier methods. The results indicate that significant cost inefficiencies are present in the utilities. An introduction of incentive-based price regulation scheme might help resolve this problem. However, the inefficiency scores obtained from different cost frontier models are not found to be robust. The levels of inefficiency estimates as well as the rankings depend on the econometric specification of the model. The established lack of robustness can be at least partly explained by different ability of the models to separate unobserved heterogeneity from inefficiency. Newly proposed true fixed effects model (Greene, J Econom 126:269–303, 2005; J Prod Anal 23(1):7–32, 2005) appears to perform better than the conventional panel data models with respect to distinguishing between unobserved heterogeneity and inefficiency. On the other hand, different models produce fairly robust results with respect to estimates of economies of output density, customer density and economies of scale. The optimal size of a company is found to closely corresponds to the sample median. Economies of scale are found in small-sized utilities, while large companies exhibit diseconomies of scale.
Starting Page	169
Ending Page	182
Page Count	14
File Format	PDF
ISSN	0895562X
Journal	Journal of Productivity Analysis
Volume Number	29
Issue Number	2
e-ISSN	15730441
Language	English
Publisher	Springer US
Publisher Date	2007-12-20
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	SFA Cost frontier function Cost inefficiency Water distribution utilities Price regulation Accounting/Auditing Operations Research/Decision Theory Econometrics Microeconomics
Content Type	Text
Resource Type	Article
Subject	Business and International Management Social Sciences Economics and Econometrics

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