Incorporating Service Quality into Yardstick Regulation: An Application to the Peru Water Sector

  • Chen Lin
  • Sanford V. Berg


Yardstick regulation requires the utilization of benchmarking, a valuable tool for improving public service delivery, especially in developing countries where inefficiencies translate into negative health impacts and social unrest. However, benchmarking must account for both the cost and the quality of service. Using data from 38 Peruvian water utilities (1996–2001), the paper evaluates quality-incorporated firm performance and identifies changes in efficiency, technology (frontier), and service quality. The study utilizes the nonparametric data envelopment analysis (DEA) model, a preference structure model, and the quality-incorporated Malmquist productivity index in evaluating firm performance; the study discusses their implications for regulating state-owned enterprises.


Data envelopment analysis (DEA) Malmquist productivity index Service quality Yardstick regulation 

JEL Classification

K23 L51 L95 


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Copyright information

© Springer Science+Business Media, LLC. 2008

Authors and Affiliations

  1. 1.Department of EconomicsLingnan UniversityHong KongChina
  2. 2.Department of Economics, Warrington College of Business AdministrationUniversity of FloridaGainesvilleUSA

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