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Evaluation of the influence of economic groups on the efficiency and quality of service of water companies: an empirical approach for Chile

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Abstract

The privatization of water and sewerage services (WSS) has led to the foundation of water economic groups, which integrate several water companies and have gained notable importance at the global level. In the framework of benchmarking studies, there are no prior studies exploring the impact that economic groups have on the efficiency and quality of service provided by water companies. This study investigates, for the first time, whether the membership of water companies in an economic group influences their performance. Quantity- and quality-adjusted efficiency scores were computed using data envelopment analysis models. An empirical application was developed for the Chilean water industry since most of their water companies are private and belong to an economic group. The results show that independent water companies provide WSS with better quality than do water companies that belong to an economic group. From a statistical point of view, it was evident that membership in an economic group impacts both the quantity- and quality-adjusted efficiency scores of water companies. The results of this study illustrate that applying the model-firm regulation to the Chilean water industry has significant drawbacks that should be addressed by the water regulator to promote the long-term sustainability of the water industry.

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Fig. 1

Notes

  1. 1.

    Note that we did not compute the Pearson correlation coefficient since it assumes that both variables (quantity- and quality-adjusted efficiency scores) are normally distributed.

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Acknowledgments

The authors would like to thank several employees of the Chilean “Superintendencia de Servicios Sanitarios” for their valuable comments and suggestions.

Author information

Correspondence to María Molinos-Senante.

Additional information

Responsible editor: Philippe Garrigues

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Molinos-Senante, M., Farías, R. Evaluation of the influence of economic groups on the efficiency and quality of service of water companies: an empirical approach for Chile. Environ Sci Pollut Res 25, 23251–23260 (2018). https://doi.org/10.1007/s11356-018-2363-x

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Keywords

  • Privatization
  • Water companies
  • Urban water
  • Quality of service
  • Performance