Are Public-Private Partnerships a Source of Greater Efficiency in Water Supply? Results of a Non-Parametric Performance Analysis Relating to the Italian Industry

Abstract

This article reports the outcome of a performance study of the water service provision industry in Italy. The study evaluates the efficiency of 21 "private or public-private" equity and 32 "public" equity water service operators and investigates controlling factors. In particular, the influence that the operator typology and service management nature -private vs. public -has on efficiency is assessed. The study employed a two-stage Data Envelopment Analysis methodology. In the first stage, the operational efficiency of water supply operators is calculated by implementing a conventional BCC DEA model, that uses both physical infrastructure and financial input and output variables to explore economies of scale. In the second stage, bootstrapped DEA and Tobit regression are performed to estimate the influence that a number of environmental factors have on water supplier efficiency. The results show that the integrated water provision industry in Italy is characterized by operational inefficiencies of service operators, and scale and agglomeration economies may have a not negligible effect on efficiency. In addition, the operator typology and its geographical location affect efficiency.

Efficiency, Conflicting Goals and Trade-Offs: A Nonparametric Analysis of the Water and Wastewater Service Industry in Italy

“…Since its introduction, DEA has been extensively employed in economic analysis to calculate measures of efficiencies in various situations and industries, such as transportation [29,31,32], government and public sector [33][34][35], public utilities [21,22,[36][37][38], healthcare [39][40][41], education [42,43], banking and finance [44,45], energy and environmental studies [46][47][48][49][50][51][52], manufacturing and information technology [53][54][55][56].…”

“…Private operators made up less than the 4% of the industry [21]. There was no regulating body in the industry, and consequently the municipalities often had the double and conflicting roles of service providers and market regulators.…”

“…Particularly, important innovations were the adoption of principles of industrial management in the production process of the water utilities; the provision of water and wastewater services within an extended geographical area (the ATO, or territorial optimal area); the selection of water utility operators through market-based mechanisms able to stimulate competition among companies; the introduction of a method to calculate service tariffs based on the full cost recovery; and the regulation of the industry carried on by a public authority. The Galli Law was not enforced for many years for several reasons, i.e., a diffused prejudice and reluctance to open the local water markets to private companies, a diffused administrative and political inertia to transfer duties, decision-making power and responsibilities to a reduced number of entities (the ATO Authorities, in total 93 planned units) from the 8000 municipalities, the lack of technical and planning capabilities of many local governments unable to manage the complex public tendering procedure to award the water service [21,60].…”

“…They also investigate different types of determinants of inefficiencies and ineffectiveness. Lo Storto [21] measures the efficiency of the Italian water service industry. The scholar employs a two-stage DEA procedure to evaluate the influence that the typologies of concessionaires and contracts to provide water services have on efficiency.…”

Congestion effect on renewable energy production efficiency in Europe

“…drinking water management, banking, transportation, healthcare, manufacturing, automotive, energy, education, high-performance computing urban management, etc. [4][5][6][7][8][9][10][11][12][13][14]. In the DEA approach a benchmarking frontier is generated as a set of linear combinations of inputs and outputs of a number of units to be evaluated denominated DMUs.…”