Incorporating Service Quality into Yardstick Regulation: An Application to the Peru Water Sector

25 Pages Posted: 15 Jan 2009 Last revised: 15 Feb 2009

See all articles by Chen Lin

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Sanford V. Berg

University of Florida - Department of Economics

Date Written: January 13, 2009

Abstract

Yardstick regulation requires the utilization of benchmarking, a valuable tool for improving the public service delivery, especially in developing countries where inefficiencies translate into negative health impacts and social unrest. However, research must account for both cost and quality of service. Using data from 38 Peruvian water utilities (1996 to 2001), the paper evaluates quality-incorporated firm performance and identifies changes in efficiency, technology (frontier), and service quality. The study utilizes the nonparametric Data Envelopment Analysis (DEA) model, a preference structure model, and quality-incorporated Malmquist Productivity Index in evaluating firm performance; the study discusses their implications for regulating state-owned enterprises.

Keywords: Yardstick regulation, Service quality, DEA, Malmquist productivity index

JEL Classification: K23, L51, L95

Suggested Citation

Lin, Chen and Berg, Sanford V., Incorporating Service Quality into Yardstick Regulation: An Application to the Peru Water Sector (January 13, 2009). Review of Industrial Organization, Vol. 32, No. 1, pp. 53-75, 2008. Available at SSRN: https://ssrn.com/abstract=1327294

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Sanford V. Berg (Contact Author)

University of Florida - Department of Economics ( email )

Gainesville, FL 32611-7140
United States
352-392-0132 (Phone)
352-392-7796 (Fax)

HOME PAGE: http://www.cba.ufl.edu/purc/facultyinfo.asp?WEBID=1260

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