Economies of scale and scope in network industries: Lessons for the UK water and sewerage sectors

Pollitt, Michael G.; Steer, Steven J.

doi:10.1016/j.jup.2011.12.004

Cited by 22 publications

(6 citation statements)

References 22 publications

(50 reference statements)

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“…Third, economies of scale are prevalent in the utility sectors of most countries, consistent with the literature (Abbott and Cohen, 2009; Fuentes et al., 2017). These outcomes reflect the fact that increases in the scale of utility operations lower total costs by reducing the amount of inputs and transactional costs (Pollitt and Steer, 2012). Fourth, intangible assets have a positive effect on the TFP growth of utility companies in four European countries.…”

Section: Utility Sectormentioning

confidence: 99%

Productivity drivers of infrastructure companies: Network industries utilizing economies of scale in the digital era

Nakatani

2023

Ann Public Coop Econ

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What drives the productivity dynamics of infrastructure companies? Using a panel of firms in 14 countries, we study total factor productivity (TFP) enhancers of utility and network services companies. We find that moving TFP closer to the technological frontier drives productivity growth at higher speeds in Asian countries than in European countries. We also find that financial leverage exerts a positive effect on TFP growth for larger infrastructure firms and that more financially developed countries utilize economies of scale through better use of financial resources. Large utility and transportation companies display a higher rate of TFP growth, indicating that a competition policy to encourage M&As would be prudent for the utility/transportation sectors to maximize economies of scale. In contrast, we find diseconomies of scale for energy companies in some countries. Moreover, young network firms improve TFP growth faster than their peers in countries with fewer product market regulations. Therefore, policies should remove entry barriers while facilitating the departure of old and low‐productivity firms from network markets. Finally, policymakers should offer well‐targeted fiscal incentives for intangible investments to boost TFP because the accumulation of intangible assets such as digital technology promotes more scale economies through network effects.

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Section: Utility Sectormentioning

confidence: 99%

Productivity drivers of infrastructure companies: Network industries utilizing economies of scale in the digital era

Nakatani

2023

Ann Public Coop Econ

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“…As a city develops revenue sources, it can extend water and wastewater systems (Waldner et al, 2019). More established cities, like central cities, have preexisting capacities based on which they can support greater expenditure on water and wastewater systems (Kneese, 2011; Pollitt and Steer, 2012). These cities have longer life frames in which to support the developmental costs of water and wastewater systems.…”

Section: Boundary Changesmentioning

confidence: 99%

Interlocal interactions, municipal boundaries and water and wastewater expenditure in city-regions

León-Moreta

Totaro

2022

Urban Studies

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Urban regions derive social and economic benefits as local governments supply water and wastewater services. We analyse differences in water and wastewater spending programmes in US city-regions. The municipal provision of water and wastewater services is situated in a regional context, examining how cities respond to different needs for services within regions. We use pooled data from 2002 to 2017 to examine changes in municipal water and wastewater expenditures. Our central finding is that water and wastewater programmes vary considerably across city-regions. Additional findings are that the municipal provision of these programmes appears to be correlated with the interaction between adjacent cities and changes to their jurisdictional boundaries. City governments may adapt their allocation of resources to water and wastewater functions according to the regional conditions surrounding city jurisdictions. This article connects theories of boundary change with systems of interlocal cooperation that support water and wastewater functions in urban regions.

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“…Economies of scale have been mainly analyzed in the water utilities [2][3][4] and electricity utilities [5,6]. Wholesale market of NG sector has also been one of the main research areas [7][8][9][10][11][12][13].…”

Section: Introductionmentioning

confidence: 99%

Economies of Scale in City Gas Sector in Seoul, South Korea: Evidence from an Empirical Investigation

Yoo

Baek

2022

Sustainability

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The city gas sector in Seoul, the capital of South Korea, consists of five locally monopolized companies. As the city gas penetration reaches 98% and city gas as cooking fuel and heating fuel is being converted to electricity and district heating system, respectively, the need to redefine the role of the city gas sector is being raised. In this respect, this study aims to analyze the economies of scale in the city gas sector using the translog variable cost function model over the period 2008–2020 and to compute the minimum efficient scale. The scale economy index ranged from 0.1 to 0.2, which was larger than 1.0. The results show that the city gas sector still enjoys economies of scale, although the economies of scale are gradually disappearing. The minimum efficiency scale was estimated to be 1.06 times the size of the total market, which is the total output of the five companies. This finding vividly suggests that reducing the number of city gas companies through mergers and acquisitions among five city gas companies is more desirable in terms of cost reduction. This study suggests that the business structure favorable to the city gas business, such as high population density and urbanization, can rapidly lose economies of scale under rapid electrification and a rigid wholesale market. The central and local governments, which have the authority to regulate the city gas business, need to promote mergers and acquisitions between city gas operators, and to normalize distorted energy rates in order to prevent excessive electrification.

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Economies of scale and scope in network industries: Lessons for the UK water and sewerage sectors

Cited by 22 publications

References 22 publications

Productivity drivers of infrastructure companies: Network industries utilizing economies of scale in the digital era

Productivity drivers of infrastructure companies: Network industries utilizing economies of scale in the digital era

Interlocal interactions, municipal boundaries and water and wastewater expenditure in city-regions

Economies of Scale in City Gas Sector in Seoul, South Korea: Evidence from an Empirical Investigation

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