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Clean Technologies and Environmental Policy

, Volume 17, Issue 4, pp 1005–1018 | Cite as

Profit, productivity and price performance changes in the water and sewerage industry: an empirical application for England and Wales

  • Alexandros Maziotis
  • David S. Saal
  • Emmanuel Thanassoulis
  • María Molinos-SenanteEmail author
Original Paper

Abstract

This paper aims to analyse the impact of regulation in the financial performance of the Water and Sewerage companies (WaSCs) in England and Wales over the period 1991–2008. In doing so, a panel index approach is applied across WaSCs over time to decompose unit-specific index number-based profitability growth as a function of the profitability, productivity and price performance growth achieved by benchmark firms, and the catch up to the benchmark firm achieved by less productive firms. The results indicated that after 2000 there is a steady decline in average price performance, while productivity improves resulting in a relatively stable economic profitability. It is suggested that the English and Welsh water regulator is now more focused on passing productivity benefits to consumers, and maintaining stable profitability than it was in earlier regulatory periods. This technique is of great interest for regulators to evaluate the effectiveness of regulation and companies to identify the determinants of profit change and improve future performance, even if sample sizes are limited.

Keywords

Profit decomposition Total factor productivity Price performance Panel index numbers Regulation Water and sewerage industry 

Notes

Acknowledgments

The authors would like to express their gratitude for the support of the Economic and Social Science Research Council as well as the Office of Water Services (Ofwat). María Molinos-Senante would like to thank Generalitat Valenciana (APOSTD/2013/110) for financial support.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2014

Authors and Affiliations

  • Alexandros Maziotis
    • 1
    • 2
  • David S. Saal
    • 2
    • 3
  • Emmanuel Thanassoulis
    • 2
  • María Molinos-Senante
    • 4
    • 5
    Email author
  1. 1.Foundazione Eni Enrico MatteiVeniceItaly
  2. 2.Aston Business SchoolAston UniversityBirminghamUK
  3. 3.Loughborough UniversityLeicestershireUK
  4. 4.Department of Mathematics for EconomicsUniversity of ValenciaValenciaSpain
  5. 5.Division of EconomicsUniversity of StirlingStirlingUK

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