Ownership and sources of inefficiency in the provision of water services

Abstract

The relative efficiency of service provision by publicly versus privately owned enterprises has been the subject of considerable theoretical debate and empirical investigation for at least the last hundred years. This research investigates the relative efficiencies of publicly versus privately owned water utilities. The publicly owned enterprises are found to be more efficient overall, as well as in the technical efficiency associated with the employment of labor, capital, energy, and material inputs. No significant differences are found in scale efficiencies between the two classes of enterprise. The greatest level of inefficiency results from the overuse of capital relative to the most efficient firms in the sample, while discrepancies in labor use was the least among the four inputs considered.

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