What Determines Efficiency? An Analysis of the Italian Water Sector

32 Pages Posted: 25 Oct 2014

See all articles by Monica Bonacina

Monica Bonacina

Bocconi University - IEFE Centre for Research on Energy and Environmental Economics and Policy

Anna Creti

Université Paris Ouest - Nanterre, La Défense - EconomiX; Ecole Polytechnique, Paris - Laboratoire d'Econometrie

Carlotta Mariotto

European Commission DG COMP - Chief Economist Team

Federico Pontoni

Bocconi University - IEFE Centre for Research on Energy and Environmental Economics and Policy

Date Written: October 24, 2014

Abstract

The Italian water sector has encompassed major changes since mid‐90s when law 96/94 has entered into force. Next to private participation, integration of services and growth in production scales, the reform was intended to revolutionize the traditional financial model almost fully based on public funds. Although citizens, politicians and experts on water services have been debating for a long time on the impact of the reform on the industry, as well as on the fairness of a tariff system inspired by the concept of full cost recovery, we are still on a state of uncertainty. The final purpose of this paper is to provide regulators with guidelines that could be used to revise water tariffs in a way that may be cost‐efficient, sustainable and fair to the most. According to the analyses, which rely on firm‐specific X-inefficiency scores, despite a satisfactory mean level of performance, in the period under investigation, efficiency improvements have been limited. Moreover, the results demonstrate that both the ownership structure and politics do have an impact on the efficiency of the firms: in particular, public shareholding and centre-right local governments negatively affects firms' performances. To this respect, we think that a more effective regulation would also have the side effect of loosening the ties between politicians and managers.

Keywords: Water Policy, Water Distribution, Water Pricing, Efficiency

JEL Classification: H44, L95

Suggested Citation

Bonacina, Monica and Creti, Anna and Mariotto, Carlotta and Pontoni, Federico, What Determines Efficiency? An Analysis of the Italian Water Sector (October 24, 2014). Available at SSRN: https://ssrn.com/abstract=2514288 or http://dx.doi.org/10.2139/ssrn.2514288

Monica Bonacina

Bocconi University - IEFE Centre for Research on Energy and Environmental Economics and Policy ( email )

viale Filippetti, 9
Milan, 20122
Italy

Anna Creti

Université Paris Ouest - Nanterre, La Défense - EconomiX ( email )

200 Avenue de la République
Nanterre cedex, Nanterre Cedex 92000
France

Ecole Polytechnique, Paris - Laboratoire d'Econometrie ( email )

1 rue Descartes
Paris, 75005
France

Carlotta Mariotto

European Commission DG COMP - Chief Economist Team ( email )

1210 Sint-Joost-ten-Noode
Bruxelles, 1000
Belgium
0032493961759 (Phone)

Federico Pontoni (Contact Author)

Bocconi University - IEFE Centre for Research on Energy and Environmental Economics and Policy ( email )

viale Filippetti, 9
Milan, 20122
Italy

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