Efficiency in the Public & Private French Water Utilities: Prospects for Benchmarking

Abstract

This paper uses a Data Envelopment Analysis (DEA) and a Stochastic Frontier Analysis (SFA) to assess the relative technical efficiency of 177 decision making units in the French water supply sector in 2009. Water utilities can be directly managed by the local authorities or contracted out and then managed by a private operator. The use of a three-stage model mixing DEA and SFA enables us to dissociate managerial inefficiencies from the structural inefficiencies and statistical noise. After having taken the environmental variables into account, we find that private management are on average slightly less efficient than public management. An explanation to this performance gap can be different resource management.

Keywords: water utilities, technical efficiency, data envelopment analysis, stochastic frontier analysis, public management

JEL Classification: D24, L95