Determinants of total efficiency in water utilities in Mexico

ABSTRACT

By using panel data analysis across 368 water utilities in Mexico over the period 2010–2014, we find that small firms are more efficient than medium and large providers and that increasing production is associated with less efficiency. Billing, income collection and profitability are relevant factors to improve efficiency. Medium and large firms require to measure consumption by service with meters in order to increase efficiency, while small firms do not require it.

KEYWORDS:

• Water utilities
• panel data
• utilities efficiency
• Mexico

JEL CLASSIFICATION:

• C33
• H21
• L95
• Q25

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ The FE specification, also known as the within group effect model, has the following form:

$Y_{it}-{\bar{Y}}_i=\beta \left(X_{it}-{\bar{X}}_i\right)+\left(u_{it}-{\bar{u}}_i\right)$

where the bar represents the group average, in this case the average of every provider. Thus, if all the observations over time in every group are the same, there is no variability within the group and it is not possible to estimate the coefficient β.