Is a Little Sunshine all We Need? On the Impact of Sunshine Regulation on Profits, Productivity and Prices in the Dutch Drinking Water Sector

34 Pages Posted: 29 Oct 2008

See all articles by K. De Witte

K. De Witte

University of Leuven (KUL); Maastricht University

David S. Saal

Aston University - Aston Business School

Date Written: October 2008

Abstract

This paper analyzes the conduct of publicly owned monopolistic utilities regulated by a voluntary sunshine regulatory model (i.e. publication of the performances of utilities). In particular, we examine the behaviour of Dutch drinking water utilities before and after the introduction of the sunshine regulation. As during the period 1992-2006 several alternative regulatory reforms including privatization, yardstick competition and profit regulation were also seriously considered, we examine how the discussion and possible implementation of these reforms influenced the behaviour of the utilities. By decomposing profit change into its economic drivers (quantity effect, price effect, operating efficiency, technical progress, scale, etc.), our results suggest that in an appropriate political and institutional context, sunshine regulation can be an effective and appropriate mean of insuring that publicly organised services are efficiently and profitably provided. In methodological terms, the profit decomposition is extended to robust (i.e. allowing for stochastic elements) and conditional (i.e. accounting for heterogeneity) non-parametric efficiency measures.

Keywords: Regulation, Drinking water utilities, Profit decomposition, Data Envelopment Analysis

JEL Classification: C14, L33, L51, L95

Suggested Citation

De Witte, Kristof and Saal, David S., Is a Little Sunshine all We Need? On the Impact of Sunshine Regulation on Profits, Productivity and Prices in the Dutch Drinking Water Sector (October 2008). Available at SSRN: https://ssrn.com/abstract=1290919 or http://dx.doi.org/10.2139/ssrn.1290919

Kristof De Witte (Contact Author)

University of Leuven (KUL) ( email )

Naamsestraat 69
Leuven, Vlaams Brabant B-3000
Belgium

HOME PAGE: http://www.feb.kuleuven.be

Maastricht University ( email )

Boschstraat 24
Maastricht, Vlaams-Brabant 6211 AX
Netherlands
003216326656 (Phone)

HOME PAGE: http://www.feb.kuleuven.be

David S. Saal

Aston University - Aston Business School ( email )

Aston Triangle
Birmingham, B47ET
United Kingdom

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