How Natural are Natural Monopolies in the Water Supply and Sewerage Sector? Case Studies from Developing and Transition Economies

38 Pages Posted: 20 Apr 2016

See all articles by Céline Nauges

Céline Nauges

National Institute for Agricultural Research (INRA) - Laboratoire d'Economie des Ressources Naturelles (LERNA)

Caroline van den Berg

World Bank - Energy and Water Department

Date Written: February 1, 2007

Abstract

Using data from the International Benchmarking NETwork database, the authors estimate measures of density and scale economies in the water industry in four countries (Brazil, Colombia, Moldova, and Vietnam) that differ substantially in economic development, piped water and sewerage coverage, and characteristics of the utilities operating in the different countries. They find evidence of economies of scale in Colombia, Moldova, and Vietnam, implying the existence of a natural monopoly. In Brazil the authors cannot reject the null hypothesis of constant returns to scale. They also find evidence of economies of customer density in Moldova and Vietnam. The results of this study show that the cost structure of the water and wastewater sector varies significantly between countries and within countries, and over time, which has implications for how to regulate the sector.

Keywords: Town Water Supply and Sanitation, Urban Water Supply and Sanitation, Economic Theory & Research, Water and Industry, Water Supply and Sanitation Governance and Institutions

Suggested Citation

Nauges, Céline and van den Berg, Caroline, How Natural are Natural Monopolies in the Water Supply and Sewerage Sector? Case Studies from Developing and Transition Economies (February 1, 2007). World Bank Policy Research Working Paper No. 4137, Available at SSRN: https://ssrn.com/abstract=962791

Céline Nauges (Contact Author)

National Institute for Agricultural Research (INRA) - Laboratoire d'Economie des Ressources Naturelles (LERNA) ( email )

21, Allee de Brienne
31000 Toulouse
France

Caroline Van den Berg

World Bank - Energy and Water Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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