Productivity growth and its drivers in the Chilean water and sewerage industry: a comparison of alternative benchmarking techniques

ABSTRACT

Several benchmarking techniques have been developed to assess and decompose the productivity growth of the industries. This paper reports the estimation of productivity change and its drivers for 23 water and sewerage companies in Chile during the period between 2007 and 2015, by applying the stochastic frontier approach (SFA) and data envelopment analysis (DEA) techniques. The study found that on average the productivity growth values estimated using the SFA approach were higher than those computed using DEA. Both methodological approaches evidenced that the main drivers contributing positively to productivity growth were the scale effect and technical change. However, under SFA, efficiency change contributed slightly positively to productivity change whereas under DEA, this driver contributed negatively. The differences in the productivity growth results between these benchmarking techniques suggest that policy-makers should not be indifferent to the selection of the most appropriate method for evaluating the productivity growth of water companies.

KEYWORDS:

• Productivity
• benchmarking
• stochastic frontier approach
• data envelopment analysis
• water companies

Disclosure statement

No potential conflict of interest was reported by the authors.

Supplementary Material

Supplemental data for this article can be accessed here.

Notes

1. In December 2016, private water companies provided service to 96% of urban Chilean customers (SISS 2016).

2. Cooper’s rule establishes that the number of firms to be evaluated must be larger than or equal to $max\left\{m+s;3\left(m+s\right)\right\}$ where $m$ is the number of inputs and $s$ is the number of outputs involved in the assessment (Cooper, Seiford, and Tone 2007).

3. Other studies considered the volume of wastewater treated for each water company. Unfortunately, this information is not available for Chilean water companies. Thus, the number of people with access to wastewater treatment services was used by previous studies evaluating the performance of Chilean water companies (Molinos-Senante and Sala-Garrido 2015).