Estimating the Relative Efficiency of Brazilian Publicly and Privately Owned Water Utilities: A Stochastic Cost Frontier Approach¹

Abstract

This paper assesses cost efficiencies of Brazilian public and private companies of water supply. To measure the efficiency, we used a stochastic frontier model derived from the translog family -a specification similar to a Cobb-Douglas including a quadratic term in log output. The model parameters are estimated by maximum likelihood using Brazilian data for the year 2002. Statistical inference leads to the conclusion that there is no evidence that private firms and public firms are significantly different in terms of efficiency measurements.

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

“…His study also showed that privately-equity firms were highly efficient. On the contrary, da Silva e Souza et al [29] estimated the relative efficiency of Brazilian publicly and private owned water utilities by implementing a stochastic cost frontier approach but no significant differences emerged between the two types of operators. Seroa da Mota and Moreira [30] also found that ownership has no effect on efficiency gains in the provision of local municipal services, even though, after privatization, the local private operators have moved faster than public ones towards the efficient frontier.…”

A review of frontier approaches to efficiency and productivity measurement in urban water utilities

“…As shown in Table 1, these include both water or sewerage (wastewater) only companies (Norman and Stoker 1991, Thanassoulis 2000, Woodbury and Dollery 2004Byrnes et al 2009) and water and sewerage companies (Thanassoulis 2002, Tupper and Resende 2004, Erbetta and Cave 2006 and both public and private utilities (Lambert et al 1993, Kirkpatrick et al 2006, Da Silva e Souza et al 2007, Munisamy 2010. As shown in Table 1, these include both water or sewerage (wastewater) only companies (Norman and Stoker 1991, Thanassoulis 2000, Woodbury and Dollery 2004Byrnes et al 2009) and water and sewerage companies (Thanassoulis 2002, Tupper and Resende 2004, Erbetta and Cave 2006 and both public and private utilities (Lambert et al 1993, Kirkpatrick et al 2006, Da Silva e Souza et al 2007, Munisamy 2010.…”

“…Coelli and Walding (2005) and Bhatttacharyya et al (1994) also exclude the costs of fixed capital. For example, Aubert and Reynaud (2005) and Da Silva e Souza et al (2007) specify the input prices and quantities of labour and electricity; Filippini et al (2008) adds materials;and Fraquelli and Moiso (2005) further include the price and quantities of services and capital. For example, Aubert and Reynaud (2005) and Da Silva e Souza et al (2007) specify the input prices and quantities of labour and electricity; Filippini et al (2008) adds materials;and Fraquelli and Moiso (2005) further include the price and quantities of services and capital.…”

“…In terms of the first area, much of the literature has examined the argument that privately owned water utilities are relatively more efficient than publicly-owned water utilities (see, for example, Lynk (1993), Lambert et al (1993), Bhattacharyya et al (1995), Estache and Ross (2002), Kirkpatrick et al (2006), Da Silva e Souza et al (2007) and Munisamy (2010)). Obviously, this well serves the policy purposes of water utility regulators in deciding among other things the preferred mix of private and public ownership and the impact of regulation, including standards and pricing.…”

Industry Structure Issues in the Water and Wastewater Sectors in Australia

“…Feigenbaum and Teeples (1983), Byrnes et al. (1986), Teeples and Glyer (1987), Houtsma (2003); see also for Spain –Garcia‐Sanchez (2006) and Brazil –da Silva e Souza et al. (2007).…”