The purpose of this study is to estimate a multivariate variable cost function in order to analyze the cost structure of a sample of Italian water distribution companies.The empirical results of this study could be used by the Italian Regulation Authority of this sector for two purposes: first, to improve the actual tariff regulation process, based on a benchmarking of variable costs, and second, to define the optimal size of a service territory in this sector.A variable cost function was estimated using panel data for a sample of 32 water distribution firms operating at the provincial level over the period 1991-1995. Results indicate the importance of explanatory variables such as price of labor, water loss and service area characteristics.♣ We are grateful to CISPEL and NOMISMA for general assistance in constructing the database for the empirical analysis. We would also like to thank Gina Poncini for proofreading the final version of this paper. The views expressed in this paper are strictly personal. Responsibility for any remaining errors lies solely with the authors.
2Results also indicate the existence of economies of output and customer density and the presence of small diseconomies of scale.
This paper provides a comparative assessment of the organization of urban waste management in selected European countries and discusses the regulatory implications of the ongoing evolution. Using an institutional economic approach, focused on governance of transactions along the value chain, we argue that: i) there is evidence of an increasing shift towards operator‐based integrated systems; ii) the emphasis put on material and energy recovery opens the market far beyond the traditional legal monopolies established for managing urban services. These results pose new challenges for economic regulation and make it more complicate to trace the boundary between the public service and the market domain. Spaces for competition in the market have become much larger, but the role of public regulation and planning are nonetheless more far‐reaching than in the past.
In 1994 the regulatory framework of water services in Italy was radically modified, by transforming a traditional
ublicly operated system, which relied heavily for investments on fiscal budgets, into a system made up of self-
ustaining corporate enterprises regulated at arm’s length. After 19 years, the time has come to make an assessment
f what has been achieved. This paper develops an original methodology, inspired by the concept of water sustain-
bility, which tries to integrate economic, environmental and financial aspects within a unique framework. Our
nalysis discloses both allocative as well as distributive impacts of the reform, showing that it has been possible
o generate some value for money while shifting the economic burden from taxpayers to service customers. How-
ver, improvements have been too slight and many signs are showing that it will be rather problematic to speed them up without undertaking a substantial restyling
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