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

David S. Saal*, David Parker, Thomas Weyman-Jones

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

The water and sewerage industry of England and Wales was privatized in 1989 and subjected to a new regime of environmental, water quality and RPI+K price cap regulation. This paper estimates a quality-adjusted input distance function, with stochastic frontier techniques in order to estimate productivity growth rates for the period 1985-2000. Productivity is decomposed so as to account for the impact of technical change, efficiency change, and scale change. Compared with earlier studies by Saal and Parker [(2000) Managerial Decision Econ 21(6):253-268, (2001) J Regul Econ 20(1): 61-90], these estimates allow a more careful consideration of how and whether privatization and the new regulatory regime affected productivity growth in the industry. Strikingly, they suggest that while technical change improved after privatization, productivity growth did not improve, and this was attributable to efficiency losses as firms appear to have struggled to keep up with technical advances after privatization. Moreover, the results also suggest that the excessive scale of the WaSCs contributed negatively to productivity growth. © 2007 Springer Science+Business Media, LLC.

Original languageEnglish
Pages (from-to)127-139
Number of pages13
JournalJournal of Productivity Analysis
Volume28
Issue number1-2
DOIs
Publication statusPublished - Oct 2007

Keywords

  • efficiency
  • environmental qualify
  • price cap regulation
  • privatization
  • productivity
  • water

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