Performance of the Tunisian Water Utility: An input-distance function approach

The main objective of this paper is to analyse the performance pattern in the Tunisian drinking water industry. The industry is a state monopoly, administered by the Tunisian Water Utility (TWU) since 1968. We apply the stochastic distance frontier method to TWU data over a period of 11 years, from 1999 to 2009. This approach is used to estimate water production technology, to measure technical efficiency levels and total factor productivity growth, and to investigate the factors influencing efficiency levels and those driving productivity growth. The results suggest that performance-based regulation can improve efficiency and enhance productivity in the Tunisian water industry.

[1]  Emili Tortosa‐Ausina,et al.  Does local public ownership matter for the efficiency of water utilities? Evidence from Italy , 2014 .

[2]  Brian Dollery,et al.  The relative economic efficiency of urban water utilities in regional New South Wales and Victoria , 2010 .

[3]  Silver Mugisha,et al.  Effects of incentive applications on technical efficiencies: Empirical evidence from Ugandan water utilities , 2007 .

[4]  Susila Munisamy.  Efficiency and Ownership in Water Supply: Evidence from Malaysia , 2009 .

[5]  C. Lovell,et al.  A survey of frontier production functions and of their relationship to efficiency measurement , 1980 .

[6]  Luis Orea,et al.  Parametric Decomposition of a Generalized Malmquist Productivity Index , 2002 .

[7]  Chen Lin,et al.  Service quality and prospects for benchmarking: Evidence from the Peru water sector , 2005 .

[8]  C. Kirkpatrick,et al.  STATE VERSUS PRIVATE SECTOR PROVISION OF WATER SERVICES IN AFRICA: AN EMPIRICAL ANALYSIS , 2004 .

[9]  T. Coelli,et al.  Regulatory Reform and Economic Performance in US Electricity Generation , 2004 .

[10]  Rolf Färe,et al.  On functional form representation of multi-output production technologies , 2010 .

[11]  George E. Battese,et al.  Estimation of stochastic frontier production functions with time-varying parameters and technical efficiencies using panel data from Indian villages , 1993 .

[12]  Simon Porcher,et al.  Efficiency in the public and private French water utilities: prospects for benchmarking , 2013 .

[13]  Rui Cunha Marques,et al.  Revisiting the determinants of local government performance , 2014 .

[14]  D. Aigner,et al.  P. Schmidt, 1977,?Formulation and estimation of stochastic frontier production function models,? , 1977 .

[15]  G. Battese,et al.  A model for technical inefficiency effects in a stochastic frontier production function for panel data , 1995 .

[16]  B. Balk.  Scale Efficiency and Productivity Change , 2001 .

[17]  Rui Cunha Marques,et al.  The influence of the operational environment on the efficiency of water utilities. , 2011, Journal of environmental management.

[18]  D. Primont,et al.  Multi-Output Production and Duality: Theory and Applications , 1994 .

[19]  Arnaud Reynaud,et al.  Estimating the benefits of efficient water pricing in France , 2004 .

[20]  R. Shephard.  Cost and production functions , 1953 .

[21]  Pedro Simões,et al.  Performance Benchmarking in Utility Regulation: the Worldwide Experience , 2011 .

[22]  Andrés J. Picazo-Tadeo,et al.  Does service quality matter in measuring the performance of water utilities , 2008 .

[23]  R. Nehring,et al.  Product diversification, production systems, and economic performance in U.S. agricultural production , 2005 .

[24]  Giovanni Fraquelli,et al.  Costs and Structure of Technology in the Italian Water Industry , 2000 .

[25]  R. Sherman.  The averch and Johnson analysis of public utility regulation twenty years later , 1985 .

[26]  A. Bottasso,et al.  Cost Inefficiency in the English and Welsh Water Industry: An Heteroskedastic Stochastic Cost Frontier Approach , 2003 .

[27]  Rui Cunha Marques,et al.  UvA-DARE ( Digital Academic Repository ) Designing performance incentives , an international benchmark study in the water sector , 2010 .

[28]  S. Ray.  Measuring Scale Efficiency from the Translog Multi-Input, Multi-Output Distance Function , 2003 .

[29]  Steven Renzetti,et al.  Ownership and performance of water utilities , 2003 .

[30]  W. Greene.  On the estimation of a flexible frontier production model , 1980 .

[31]  I. García‐Sánchez,et al.  Efficiency Measurement in Spanish Local Government: The Case of Municipal Water Services , 2006 .

[32]  Chunyan Yu,et al.  The effects of exogenous variables in efficiency measurement - A monte carlo study , 1998, Eur. J. Oper. Res..

[33]  Rui Cunha Marques,et al.  Quantitative studies of water and sanitation utilities: a benchmarking literature survey , 2011 .

[34]  David S. Saal,et al.  Is a little sunshine all we need? On the impact of sunshine regulation on profits, productivity and prices in the Dutch drinking water sector , 2008 .

[35]  Timothy Coelli,et al.  An Introduction to Efficiency and Productivity Analysis , 1997 .

[36]  Timothy Coelli,et al.  A Bayesian Approach to Imposing Curvature on Distance Functions , 2005 .

[37]  Terence J. Wales,et al.  On the flexibility of flexible functional forms : An empirical approach , 1977 .

[38]  Massimo Filippini,et al.  Cost efficiency of Slovenian water distribution utilities: an application of stochastic frontier methods , 2008 .

[39]  David Parker,et al.  Assessing the performance of water operations in the English and Welsh water industry:a lesson in the implications of inappropriately assuming a common frontier , 2006 .

[40]  Daniel Santín,et al.  How to generate regularly behaved production data? A Monte Carlo experimentation on DEA scale efficiency measurement , 2009, Eur. J. Oper. Res..

[41]  Michael Zschille,et al.  The Performance of German Water Utilities: A First Non-Parametric Analysis , 2009 .

[42]  J. Laffont,et al.  Competition in telecommunications , 1999 .

[43]  Andrew C. Worthington,et al.  Productivity, efficiency and technological progress in Australia's urban water , 2011 .

[44]  C. Kirkpatrick,et al.  An Empirical Analysis of State and Private-Sector Provision of Water Services in Africa. , 2006 .

[45]  Pedro Simões,et al.  Does the sunshine regulatory approach work?: Governance and regulation model of the urban waste services in Portugal , 2008 .

[46]  Maurizio Conti.  Ownership Relative Efficiency in the Water Industry: A Survey of the International Empirical Evidence , 2005 .

[47]  M. Farrell.  The Measurement of Productive Efficiency , 1957 .

[48]  R. Sherman.  Capital waste in the rate-of-return regulated firm , 1992 .

[49]  Andrés J. Picazo-Tadeo,et al.  The role of environmental factors in water utilities’ technical efficiency. Empirical evidence from Spanish companies , 2009 .

[50]  Hendrik Wolff,et al.  Imposing Curvature and Monotonicity on Flexible Functional Forms: An Efficient Regional Approach , 2010 .

[51]  T. Coelli,et al.  Performance measurement in the Australian water supply industry: A preliminary analysis , 2005 .

[52]  G. Battese,et al.  Identification of Factors Which Influence the Technical Inefficiency of Indian Farmers , 1996 .

[53]  Arnaud Reynaud,et al.  Measuring Economies of Vertical Integration in Network Industries: An Application to the Water Sector , 2007 .

[54]  G. Debreu.  The Coefficient of Resource Utilization , 1951 .

[55]  W. Meeusen,et al.  Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error , 1977 .

[56]  Bruce Cohen,et al.  Productivity and efficiency in the water industry , 2009 .

[57]  Chen Lin,et al.  Incorporating Service Quality into Yardstick Regulation: An Application to the Peru Water Sector , 2008 .

[58]  Matthias Walter,et al.  Quo vadis efficiency analysis of water distribution? A comparative literature review , 2009 .

[59]  J L Ford,et al.  Cost Functions for the Water Industry , 1969 .

[60]  A. Estache,et al.  How Different Is the Efficiency of Public and Private Water Companies in Asia , 2002 .

[61]  Marcelo Resende,et al.  Efficiency and regulatory issues in the Brazilian water and sewage sector: an empirical study , 2004 .

[62]  Akira Takayama,et al.  Behavior of the Firm under Regulatory Constraint , 1969 .

[63]  S. Mugisha.  Technical inefficiency effects in a stochastic production function for managerial incentives in public water utilities , 2014 .

[64]  Timothy Coelli,et al.  On the econometric estimation of the distance function representation of a production technology , 2000 .

[65]  Susan Feigenbaum,et al.  Public versus Private Water Delivery: A Hedonic Cost Approach , 1983 .

[66]  Patrick Mande Buafua.  Efficiency of urban water supply in Sub-Saharan Africa: Do organization and regulation matter? , 2015 .

[67]  R. Banker.  Estimating most productive scale size using data envelopment analysis , 1984 .

[68]  Diane P. Dupont,et al.  Measuring the Technical Efficiency of Municipal Water Suppliers: The Role of Environmental Factors , 2009, Land Economics.

[69]  Franz C. Palm,et al.  Wald Criteria for Jointly Testing Equality and Inequality , 1986 .

[70]  Rui Cunha Marques,et al.  Nonparametric Benchmarking of Japanese Water Utilities: Institutional and Environmental Factors Affecting Efficiency , 2014 .

[71]  R. Shepherd.  Theory of cost and production functions , 1970 .

[72]  B. Balk.  Measuring and Decomposing Capital Input Cost , 2011 .

[73]  Tao Zhang,et al.  A comparative analysis of multi-output frontier models , 2008 .