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Title:Consolidating the water industry: An analysis of the potential gains from horizontal integration in a conditional efficiency framework PDF Logo
Authors:Zschille, Michael
Issue Date:2012
Series/Report no.:Discussion Papers, German Institute for Economic Research, DIW Berlin 1187
Abstract:The German potable water supply industry is regarded as being highly fragmented, thus inhibiting high potentials for efficiency improvements through consolidation. Focusing on a hypothetical restructuring of the industry, we apply Data Envelopment Analysis (DEA) to analyze the potential efficiency gains from mergers between water utilities at the county level. A conditional efficiency framework is used to account for the operating environment. Highest efficiency improvement potentials turn out to result from reducing individual inefficiencies. The majority of the 84 merger cases is characterized by merger gains, which are decomposed into a technical efficiency effect, a harmony effect and a scale effect. The results suggest to improve incentives for efficient operations in water supply and a consolidation of the industry structure.
Subjects:Water Supply
Horizontal Integration
Data Envelopment Analysis
Conditional Efficiency
Nonparametric Estimation
JEL:C14
L22
L25
L95
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des DIW
DIW-Diskussionspapiere

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