Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142022
Authors: 
Zschille, Michael
Year of Publication: 
2016
Series/Report no.: 
DIW Discussion Papers 1576
Abstract: 
Potable water supply in Germany is highly fragmented. A consolidation of the industry could, therefore, lead to lower cost of water supply and price savings for the customers. In this paper we estimate a total cost function for potable water supply based on a unique sample of German water utilities observed between 2004 and 2010. Newly available data allows for a detailed cost modeling approach. Capital stocks are estimated using the Perpetual Inventory Method, while capital costs are estimated using a weighted cost of capital approach. Local water suppliers are found to have strong cost advantages compared to regional suppliers. While the results indicate strong density effects, economies of scale are only found for the smallest water utilities. Thus, the results argue against a consolidation of the industry.
Subjects: 
water supply
cost function
economies of scale
seemingly unrelated regression
JEL: 
C14
L22
L95
Q25
Document Type: 
Working Paper

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