The Performance of German Water Utilities: A (Semi)-Parametric Analysis

Abstract:     
Germany's water supply industry is characterized by a multitude of utilities and widely diverging prices, possibly resulting from structural differences beyond the control of firms' management, but also from inefficiencies. In this article we use Data Envelopment Analysis and Stochastic Frontier Analysis to determine the utilities' technical efficiency scores based on cross-sectional data from 373 public and private water utilities in 2006. We find large differences in technical efficiency scores even after accounting for significant structural variables like network density, share of groundwater usage and water losses.

Number of Pages in PDF File: 36

Keywords: Water supply, technical efficiency, data envelopment analysis, stochastic frontier analysis, structural variables, bootstrapped truncated regression

JEL Classification: L95, C14, Q25

working papers series