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Journal of Regulatory Economics

, Volume 37, Issue 3, pp 219–242 | Cite as

Is a little sunshine all we need? On the impact of sunshine regulation on profits, productivity and prices in the Dutch drinking water sector

  • Kristof De WitteEmail author
  • David S. Saal
Open Access
Original Article

Abstract

This paper analyzes the performance of Dutch drinking water utilities before and after the introduction of sunshine regulation, which involves publication of the performance of utilities but no formal price regulation. By decomposing profit change into its economic drivers, our results suggest that, in the Dutch political and institutional context, sunshine regulation was effective in improving the productivity of publicly organised services. Nevertheless, while sunshine regulation did bring about a moderate reduction in water prices, sustained and substantial economic profits suggest that it may not have the potential to fully align output prices with economic costs in the long run. In methodological terms, the DEA based profit decomposition is extended to robust and conditional non-parametric efficiency measures, so as to account better for both uncertainty and differences in operating environment between utilities.

Keywords

Regulation Drinking water utilities Profit decomposition Data Envelopment Analysis 

JEL Classification

C14 L33 L51 L95 

Notes

Acknowledgements

We would like to thank Per Agrell, Pablo Arocena, Jos Blank, Leticia Blazquez, Laurens Cherchye, Tim Coelli, Paul De Bijl, Elbert Dijkgraaf, Emili Grifell-Tatjé, Pierre Koning, Patrick Koot, Mathias Lorentz, Chris O’Donnell, Mika Kortelainen, Louis Orea, Sergio Perelman, Emmanuel Thanassoulis and seminar participants at Université Catholique de Louvain (UCL),Wissenschaftszentrum Berlin für Sozialforschung (WZB), the Tenth Workshop of the EURO Working Group on Decentralized Decision Making, Katholieke Universiteit Leuven (KUL), Centre for European Economic Research (ZEW) in Mannheim, Netherlands Bureau for Economic Policy Analysis (CPB), EWEPA XI conference and EARIE 09 for useful suggestions and comments. We are also grateful to two anonymous referees for constructive and insightful comments.

Open Access

This article is distributed under the terms of the Creative Commons Attribution Noncommercial License which permits any noncommercial use, distribution,and reproduction in any medium, provided the original author(s) and source are credited.

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Copyright information

© The Author(s) 2009

Open AccessThis is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.

Authors and Affiliations

  1. 1.Center for Economic StudiesKatholieke Universiteit Leuven (KUL)LeuvenBelgium
  2. 2.Top Institute for Evidence Based Education ResearchMaastricht UniversityMaastrichtThe Netherlands
  3. 3.Economics and Strategy Group, Aston Business SchoolAston UniversityBirminghamUK

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