Drivers of productivity change in water companies: an empirical approach for England and Wales

ABSTRACT

In this study, a normalized quadratic cost function was employed to estimate total factor productivity for the water sector in England and Wales over the period 1993–2016. Productivity was then decomposed into technical change and scale effect. Technical change is further broken down into pure technical change, non-neutral technical change, and effects due to scale-augmenting technical change. The water industry increased its productivity annually by 6.1%, with 1.5% corresponding to technical change and 4.5% attributed to the scale effect. Lastly, we discuss some policy implications by linking the productivity results with the regulatory cycle.

KEYWORDS:

• Quadratic cost function
• total factor productivity
• technical change
• scale efficiency
• water industry
• England and Wales

Disclosure statement

No potential conflict of interest was reported by the authors.

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