Nonparametric Benchmarking of Japanese Water Utilities: Institutional and Environmental Factors Affecting Efficiency

Rui Cunha Marques · Sanford V. Berg · Shinji Yane

141 citations0/0 files storedJournal of Water Resources Planning and Management

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Efficiency Analysis Using DEA Water Systems and Optimization Water Governance and Infrastructure

Abstract

Although the Japanese water sector is economically and socially important, few empirical studies are available to help analysts and policy-makers understand the performance patterns in the industry. This study applies data envelopment analysis to 5,538 observations of 1,144 utilities that supplied drinking water between 2004 and 2007. With a comprehensive census of utilities, the present study controls for many factors affecting efficiency: region, prefecture, ownership/governance, water source, vertical integration (purchased or produced alone), water or integrated system, production, treatment, transport and distribution of water), peak factor, per capita consumption, customer density, water losses, monthly water charge, outsourcing, subsidies, gross prefecture product, and time. Thus, this study derives comprehensive conclusions regarding efficiency patterns in Japan. The analysis finds that the average level of inefficiency (weighted by volume) is 57% in the constant return to scale model, but only 24% for the (more flexible) variable return to scale model. Improving sector efficiency and transferring funds to more innovative sectors rather than using scarce funds to subsidize water distribution would benefit citizens. Thus, the application of advanced quantitative techniques to Japanese water utilities improves the understanding of efficiency patterns and underscores the importance of in-depth studies of the individual factors examined in this study.

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References

1978Measuring the efficiency of decision making units 1998Sensitivity Analysis of Efficiency Scores: How to Bootstrap in Nonparametric Frontier Models 2000A general methodology for bootstrapping in non-parametric frontier models 2008The Measurement of Productive Efficiency and Productivity Change 2002Nonparametric frontier estimation: a robust approach 2008Evaluation of research in efficiency and productivity: A survey and analysis of the first 30 years of scholarly literature in DEA 2005Introducing Environmental Variables in Nonparametric Frontier Models: a Probabilistic Approach 2007Advanced Robust and Nonparametric Methods in Efficiency Analysis: Methodology and Applications

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