The impact of privatization and regulation on the water and sewerage industry in England and Wales: a translog cost function model

Determining the contribution of technical change, efficiency change and scale change to productivity growth in the privatized English and Welsh water and sewerage industry: 1985–2000

“…The estimated returns to scale for the sample average firm is 0.861 and statistically different from one, thereby suggesting that the sample average WaSC is characterized by decreasing returns of scale. 4 This result is highly consistent with those in Saal and Parker (2000) and Stone and Webster (2004), which reported evidence of diseconomies of scale for the WaSCs.…”

“…Nonetheless, this paper's decomposition of productivity has led to some interesting further conclusions. Firstly, the study provides strong evidence that the WaSCs are indeed characterized by decreasing returns to scale, as noted by Saal and Parker (2000) and Stone and Webster (2004). But the paper has extended this previous research by quantifying the resulting impact on productivity growth rates caused by the continued increase in WaSC scale.…”

“…However, while this suggests that it would be appropriate to employ a specification which allows for inefficiency, the methodology employed in Saal and Parker (2000) assumes that the WaSCs attempt to minimize costs. In addition to this and the other potential methodological issues mentioned above, Parker (2000, 2001), do not provide a decomposition of the sources of changes in productivity growth.…”

“…Saal and Parker (2001) employs nonparametric Tornqvist productivity growth indices, with quality adjusted outputs, but also does not control for other exogenous factors that may influence costs or input requirements. Saal and Parker (2000) employs a translog multiple output cost function system with quality adjusted outputs, but also does not control for such exogenous factors. Additionally, both papers assume that outputs can be adequately characterized by using the quality adjusted number of water and sewerage customers as outputs, although recent research by Garcia and Thomas (2001) and Stone and Webster (2004) both suggest that water models are significantly improved by the further inclusion of output variables that capture the physical volume of water and sewerage services.…”

Nonparametric measures of returns to scale: an application to German water supply

“…Saal et al (2007) find negative scale effects in the productivity growth of water and sewerage companies (WaSCs) in England and Wales over the 1985-2000 period. Similarly, Saal and Parker (2000) find diseconomies of scale for a sample of WaSCs observed between 1985 and 1999. This result is confirmed by Saal and Parker (2004).…”