Skip to main content
SpringerLink
Log in

The role of environmental variables on the efficiency of water and sewerage companies: a case study of Chile

  • Research Article
  • Published:
Environmental Science and Pollution Research Aims and scope Submit manuscript

Abstract

This paper evaluates the efficiency of water and sewerage companies (WaSCs) by introducing the lack of service quality as undesirable outputs. It also investigates whether the production frontier of WaSCs is overall constant returns to scale (CRS) or variable returns to scale (VRS) by using two different data envelopment analysis models. In a second-stage analysis, we study the influence of exogenous and endogenous variables on WaSC performance by applying non-parametric hypothesis tests. In a pioneering approach, the analysis covers 18 WaSCs from Chile, representing about 90 % of the Chilean urban population. The results evidence that the technology of the sample studied is characterized overall by CRS. Peak water demand, the percentage of external workers, and the percentage of unbilled water are the factors affecting the efficiency of WaSCs. From a policy perspective, the integration of undesirable outputs into the assessment of WaSC performance is crucial not to penalize companies that provide high service quality to customers.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

Notes

  1. This information can be found at http://www.siss.gob.cl/.

  2. On 29 July 2014, 1US$ was 564.97 CLP and 1€ was 757.58 CLP.

  3. More information about this software can be found at http://www.maxdea.cn/MaxDEA.htm.

  4. While the authors strongly believe that using a sea wastewater pipe is not a wastewater treatment, the Chilean SISS included this process in its report of water and sewerage services in Chile.

References

  • Antonioli B, Filippini M (2001) The use of a variable cost function in the regulation of the Italian water industry. Util Policy 10(4):181–187

    Article  Google Scholar 

  • Aubert C, Reynaud A (2005) The impact of regulation on cost efficiency: an empirical analysis of Wisconsin water utilities. J Prod Anal 23:383–409

    Article  Google Scholar 

  • Badin L, Daraio C, Simar L (2014) Explaining inefficiency in nonparametric production models: the state of the art. Ann Oper Res 214(1):5–30

    Article  Google Scholar 

  • Banker RD, Charnes A, Cooper WW (1984) Some models for estimating technical and scale inefficiencies in data envelopment analysis. Manag Sci 30(9):1078–1092

    Article  Google Scholar 

  • Baranzini A, Faust AK (2009) The cost structure of water utilities in Switzerland. Working Paper Cahier de recherche No HES-SO/HEG-GE/C–10/5/1–CH, Haute école de gestion de Genève CRAG, Switzerland

  • Barros CP, Managi S, Matousek R (2012) The technical efficiency of the Japanese banks: non-radial directional performance measurement with undesirable output. Omega 40(1):1–8

    Article  Google Scholar 

  • Berg S, Lin C (2008) Consistency in performance rankings: the Peru water sector. Appl Econ 40(6):793–805

    Article  Google Scholar 

  • Berg S, Marques R (2011) Quantitative studies of water and sanitation utilities: a benchmarking literature survey. Water Policy 13(5):591–606

    Article  Google Scholar 

  • Byrnes J, Crase L, Dollery B, Villano R (2010) The relative economic efficiency of urban water utilities in regional New South Wales and Victoria. Resour Energy Econ 32(3):439–455

    Article  Google Scholar 

  • Camioto FDC, Mariano EB, Rebelatto DADN (2014) Efficiency in Brazil’s industrial sectors in terms of energy and sustainable development. Environ Sci Pol 37:50–60

    Article  Google Scholar 

  • Carvalho P, Marques RC (2011) The influence of the operational environment on the efficiency of water utilities. J Environ Manag 92(10):2698–2707

    Article  Google Scholar 

  • Carvalho P, Marques RC (2012) Using non-parametric technologies to estimate returns to scale in the Iberian and international seaports. Int J Shipp Transp Logist 4(3):286–302

    Article  Google Scholar 

  • Carvalho P, Marques RC (2014) Computing economies of vertical integration, economies of scope and economies of scale using partial frontier nonparametric methods. Eur J Oper Res 234(1):292–307

    Article  Google Scholar 

  • Charnes A, Cooper WW, Rhodes E (1978) Measuring the efficiency of decision making units. Eur J Oper Res 2(6):429–444

    Article  Google Scholar 

  • Cheng G, Zervopoulos PD (2014) Estimating the technical efficiency of health care systems: a cross-country comparison using the directional distance function. Eur J Oper Res 238(3):899–910

    Article  Google Scholar 

  • Chung YH, Färe R, Grosskopf S (1997) Productivity and undesirable outputs: a directional distance function approach. J Environ Manag 51(3):229–240

    Article  Google Scholar 

  • Coelli TJ, Prasada Rao DS, O'Donnell CJ, Battese GE (2005) An introduction to efficiency and productivity analysis. Springer, USA

    Google Scholar 

  • Cooper WW, Seiford LM, Tone K (2006) Introduction to data envelopment analysis and its uses. Springer, USA

    Google Scholar 

  • Corton ML, Berg SV (2009) Benchmarking Central American water utilities. Util Policy 17(3–4):267–275

    Article  Google Scholar 

  • Daraio C, Simar L (2007) Advanced robust and nonparametric methods in efficiency analysis, Methodology and applications. Springer, New York

    Google Scholar 

  • De Witte K, Marques RC (2010) Influential observations in frontier models, a robust non-oriented approach to the water sector. Ann Oper Res 181(1):377–392

    Article  Google Scholar 

  • De Witte K, Marques RC (2011) Big and beautiful? On non-parametrically measuring scale economies in nonconvex technologies. J Prod Anal 35:213–226

    Article  Google Scholar 

  • Egilmez G, Kucukvar M, Tatari O (2013) Sustainability assessment of U.S. manufacturing sectors: and economic input output-based frontier approach. J Clean Prod 53:91–102

    Article  Google Scholar 

  • Epure M, Kerstens K, Prior D (2011) Bank productivity and performance groups: a decomposition approach based upon the Luenberger productivity indicator. Eur J Oper Res 211(3):630–641

    Article  Google Scholar 

  • Färe R, Grosskopf S, Lovell CAK, Pasurka C (1989) Multilateral productivity comparisons when some outputs are undesirable: a nonparametric approach. Rev Econ Stat 71:90–98

    Article  Google Scholar 

  • Färe R, Grosskopft S, Lovell CAK (1994) Production frontiers. Cambridge University Press, Cambridge

    Google Scholar 

  • Filippini M, Hrovatin N, Zoric J (2008) Cost efficiency of Slovenian water distribution utilities: an application of stochastic frontier methods. J Prod Anal 29:169–182

    Article  Google Scholar 

  • Garcia S, Thomas A (2001) The structure of municipal water supply costs: application to a panel of French local communities. J Prod Anal 16:5–29

  • Grosskopf S (1996) The role of the reference technology in measuring production efficiency. Econ J 96:499–513

    Article  Google Scholar 

  • Guerrini A, Romano G, Campedelli B (2011) Factors affecting the performance of water utility companies. Int J Public Sect Manag 24(6):543–566

    Article  Google Scholar 

  • Guerrini A, Romano G, Campedelli B (2013) Economies of scale, scope, and density in the Italian water sector: a two-stage data envelopment analysis approach. Water Resour Manag 27(13):4559–4578

    Article  Google Scholar 

  • Gupta S, Kumar S, Sarangi GK (2012) Measuring the performance of water service providers in urban India: implications for managing water utilities. Water Policy 14(3):391–408

    Article  Google Scholar 

  • Hailu A, Veeman TS (2001) Non-parametric productivity analysis with undesirable outputs: an application to the Canadian pulp and paper industry. Am J Agric Econ 83(3):605–616

    Article  Google Scholar 

  • Hernández-Sancho F, Molinos-Senante M, Sala-Garrido R, Del Saz-Salazar S (2012) Tariffs and efficient performance by water suppliers: an empirical approach. Water Policy 14(5):854–864

    Article  Google Scholar 

  • Horn T (2011) Incorporating water purification in efficiency evaluation: evidence from Japanese water utilities. Appl Econ Lett 18(18):1789–1794

    Article  Google Scholar 

  • Kanakoudis V, Tsitsifli S, Samaras P, Zouboulis A, Banovec P (2013) A new set of water losses-related performance indicators focused on areas facing water scarcity conditions. Desalin Water Treat 51(13–15):2994–3010

    Article  Google Scholar 

  • Kumar S, Managi S (2010) Service quality and performance measurement: evidence from the Indian water sector. Int J Water Resour Dev 26(2):173–191

    Article  Google Scholar 

  • Lannier AL, Porcher S (2014) Efficiency in the public and private French water utilities: prospects for benchmarking. Appl Econ 46(5):556–572

    Article  Google Scholar 

  • Lin C (2005) Service quality and prospects for benchmarking: evidence from the Peru water sector. Util Policy 13(3):230–239

    Article  Google Scholar 

  • Lozano S, Gutiérrez E, Moreno P (2013) Network DEA approach to airports performance assessment considering undesirable outputs. Appl Math Model 37(4):1665–1676

    Article  Google Scholar 

  • Marques RC, De Witte K (2011) Is big better? On scale and scope economies in the Portuguese water sector. Econ Model 28(3):1009–1016

    Article  Google Scholar 

  • Marques R, Monteiro A (2004) Benchmarking the economic performance of Portuguese water and sewerage services. In: Emrouznejad A, Podinovski V (eds) Data envelopment analysis and performance measurement. Warwick Print, Coventry, pp 65–72

    Google Scholar 

  • Marques RC, Simões P, Pires JS (2011) Performance benchmarking in utility regulation: the worldwide experience. Pol J Environ Stud 20(1):125–132

    Google Scholar 

  • Marques R, Berg S, Yane S (2014) Nonparametric benchmarking of Japanese water utilities: institutional and environmental factors affecting efficiency. J Water Resour Plan Manag 140(5):562–571

    Article  Google Scholar 

  • Mbuvi D, De Witte K, Perelman S (2012) Urban water sector performance in Africa: a step-wise bias-corrected efficiency and effectiveness analysis. Util Policy 22:31–40

    Article  Google Scholar 

  • Molinos-Senante M, Hernandez-Sancho F, Sala-Garrido R (2014a) Benchmarking in wastewater treatment plants: a tool to save operational costs. Clean Techn Environ Policy 16(1):149–161

    Article  Google Scholar 

  • Molinos-Senante M, Maziotis A, Sala-Garrido R (2014b) The Luenberger productivity indicator in the water industry: an empirical analysis for England and Wales. Util Policy 30:18–28

    Article  Google Scholar 

  • Molinos-Senante M, Hernandez-Sancho F, Mocholí-Arce M, Sala-Garrido R (2014c) Economic and environmental performance of wastewater treatment plants: potential reductions in greenhouse gases emissions. Resour Energy Econ 38:125–140

    Article  Google Scholar 

  • Oum TH, Pathomsiri S, Yoshida Y (2013) Limitations of DEA-based approach and alternative methods in the measurement and comparison of social efficiency across firms in different transport modes: an empirical study in Japan. Transp Res E Logist Transp Rev 57:16–26

    Article  Google Scholar 

  • Picazo-Tadeo AJ, Sáez-Fernández FJ, González-Gómez F (2008) Does service quality matter in measuring the performance of water utilities? Util Policy 16(1):30–38

    Article  Google Scholar 

  • Picazo-Tadeo AJ, González-Gómez F, Sáez-Fernández FJ (2009) Accounting for operating environments in measuring water utilities’ managerial efficiency. Serv Ind J 29(6):761–773

    Article  Google Scholar 

  • Saal DS, Parker D (2001) Productivity and price performance in the privatized water and sewerage companies of England and Wales. J Regul Econ 20(1):61–90

    Article  Google Scholar 

  • Saal DS, Parker D, Weyman-Jones T (2007) 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. J Prod Anal 28(1–2):127–139

    Article  Google Scholar 

  • Sala-Garrido R, Molinos-Senante M, Hernández-Sancho F (2011) Comparing the efficiency of wastewater treatment technologies through a DEA metafrontier model. Chem Eng J 173:766–772

    Article  CAS  Google Scholar 

  • Sala-Garrido R, Hernández-Sancho F, Molinos-Senante M (2012) Assessing the efficiency of wastewater treatment plants in an uncertain context: a DEA with tolerances approach. Environ Sci Pol 18:34–44

    Article  CAS  Google Scholar 

  • Seiford LM, Zhu J (2002) Modeling undesirable factors in efficiency evaluation. Eur J Oper Res 142(1):16–20

    Article  Google Scholar 

  • Shih J, Harrington W, Pizer W, Gillington K (2006) Economies of scale in community water systems. J Am Water Works Assoc 98:100–108

    CAS  Google Scholar 

  • Simar L, Wilson P (2000) A general methodology for bootstrapping in non-parametric frontier models. J Appl Stat 27(6):779–802

    Article  Google Scholar 

  • Simar L, Wilson PW (2007) Estimation and inference in two-stage, semi-parametric models of productivity processes. J Econ 136:31–64

    Article  Google Scholar 

  • Simar L, Wilson P (2008) Statistical inference in nonparametric frontier models: recent developments and perspectives. In: Fried H, Lovell CAK, Schmidt S (eds) The measurement of productive efficiency and productivity change. Oxford University Press, New York, pp 421–521

    Google Scholar 

  • Simoes P, Marques RC (2012) Influence of regulation on the productivity of waste utilities. What can we learn with the Portuguese experience? Waste Manag 32(6):1266–1275

    Article  Google Scholar 

  • SISS (Superintendencia de Servicios Sanitarios) (2012) Water and sewerage services in 2012. Available from: http://www.siss.gob.cl/577/w3-propertyvalue-3443.html. 19 Feb 2015 (In Spanish)

  • Torres M, Morrison-Paul CJ (2006) Driving forces for consolidation or fragmentation of the US water utility industry: a cost function approach with endogenous output. J Urban Econ 59:104–120

    Article  Google Scholar 

  • Tupper HC, Resende M (2004) Efficiency and regulatory issues in the Brazilian water and sewage sector: an empirical study. Util Policy 12(1):29–40

    Article  Google Scholar 

  • Woodbury K, Dollery B (2004) Efficiency measurement in Australian local government: the case of New South Wales municipal water utilities. Rev Policy Res 21:615–636

    Article  Google Scholar 

  • Worthington AC (2014) A review of frontier approaches to efficiency and productivity measurement in urban water utilities. Urban Water J 11(1):55–73

    Article  Google Scholar 

  • Yang C-C (2014) An enhanced DEA model for decomposition of technical efficiency in banking. Ann Oper Res 214(1):167–185

    Article  Google Scholar 

  • Yu M-M (2010) Capacity efficiency measurement using a three-stage DEA approach: evidence from domestic airports in Taiwan. Transp Plan Technol 33(2):221–235

    Article  Google Scholar 

  • Zanella A, Camanho AS, Dias TG (2013) Benchmarking countries’ environmental performance. J Oper Res Soc 64(3):426–438

    Article  Google Scholar 

  • Zhou G, Chung W, Zhang Y (2014) Measuring energy efficiency performance of China's transport sector: a data envelopment analysis approach. Expert Syst Appl 41(2):709–722

    Article  Google Scholar 

Download references

Acknowledgments

The authors wish to thank anonymous referees and editor for their valuable comments and suggestions. María Molinos-Senante would like to thank Conicyt through the programme Fondecyt (3150268) for financial support.

Author information

Authors and Affiliations

  1. Departamento de Ingeniería Hidráulica y Ambiental, Pontificia Universidad Católica de Chile, Av. Vicuña Mackenna 4860, Santiago, Chile

    María Molinos-Senante

  2. Escuela de Arquitectura e Instituto de Estudios Urbanos, Pontificia Universidad Católica de Chile, El Comendador 1916, Santiago, Chile

    María Molinos-Senante

  3. Centro de Desarrollo Urbano Sustentable CONICYT/FONDAP/15110020, Av. Vicuña Mackenna 4860, Santiago, Chile

    María Molinos-Senante

  4. Departamento de Matemáticas para la Economía y la Empresa, Universidad de Valencia, Avd. Tarongers S/N., Valencia, Spain

    Ramón Sala-Garrido

  5. Departamento de Métodos Cuantitativos para la Economía y la Empresa, Universidad de Murcia, Campus de Espinardo, 30100, Murcia, Spain

    Matilde Lafuente

Authors
  1. María Molinos-Senante
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Ramón Sala-Garrido
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Matilde Lafuente
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to María Molinos-Senante.

Additional information

Responsible editor: Philippe Garrigues

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Molinos-Senante, M., Sala-Garrido, R. & Lafuente, M. The role of environmental variables on the efficiency of water and sewerage companies: a case study of Chile. Environ Sci Pollut Res 22, 10242–10253 (2015). https://doi.org/10.1007/s11356-015-4225-0

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s11356-015-4225-0

Keywords

Search

Navigation