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Tradeoff between Economies of Size in Treatment and Diseconomies of Distribution for Rural Water Systems

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  • Boisvert, Richard N.
  • Schmit, Todd M.

Abstract

This paper outlines a method to determine the tradeoff between economies of size in water treatment and diseconomies of distribution. Cost equations are estimated for several treatment technologies and distribution extensions. Empirical results are used to identify optimal system size where average total costs are minimized. Regardless of treatment, most costs are due to distribution. As water systems expand service territories, only in the most densely populated areas would remaining economies of size in treatment outweigh the diseconomies in distribution.

Suggested Citation

  • Boisvert, Richard N. & Schmit, Todd M., 1997. "Tradeoff between Economies of Size in Treatment and Diseconomies of Distribution for Rural Water Systems," Agricultural and Resource Economics Review, Cambridge University Press, vol. 26(2), pages 237-246, October.
    • Handle: RePEc:cup:agrerw:v:26:y:1997:i:02:p:237-246_00
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    1. Boisvert, Richard N. & Schmit, Todd M., 1996. "Economies of Size in Water Treatment vs. Diseconomies of Dispersion for Small Public Water Systems," Working Papers 127921, Cornell University, Department of Applied Economics and Management.
    2. Robert M. Clark & Richard G. Stevie, 1981. "A Water Supply Cost Model Incorporating Spatial Variables," Land Economics, University of Wisconsin Press, vol. 57(1), pages 18-32.
    3. Ford, J L & Warford, J J, 1969. "Cost Functions for the Water Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 18(1), pages 53-63, November.
    4. Schmit, Todd M. & Boisvert, Richard N., 1996. "Rural Utilities Service's Water and Waste Disposal Loan and Grant Program and its Contribution to Small Public Water System Improvements in New York State," Research Bulletins 122990, Cornell University, Department of Applied Economics and Management.
    5. Christensen, Laurits R & Greene, William H, 1976. "Economies of Scale in U.S. Electric Power Generation," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 655-676, August.
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    2. Tsao, Leo & Schmit, Todd M. & Boisvert, Richard N., 1998. "Effects of Amendments to the Safe Drinking Water Act on Local Government Finance and Rural Residents in New York," Working Papers 179377, Cornell University, Department of Applied Economics and Management.
    3. O'Gorman, Melanie, 2021. "Mental and physical health impacts of water/sanitation infrastructure in First Nations communities in Canada: An analysis of the Regional Health Survey," World Development, Elsevier, vol. 145(C).
    4. Fox, William F. & Gurley, Tami, 2006. "Will consolidation improve sub-national governments ?," Policy Research Working Paper Series 3913, The World Bank.
    5. B. James Deaton & Bethany Lipka, 2023. "Cooperation between First Nations and Municipalities: Do Water-Sharing Arrangements Improve Drinking Water Quality?," Land Economics, University of Wisconsin Press, vol. 99(3), pages 433-457.
    6. Saal David S. & Arocena Pablo & Maziotis Alexandros & Triebs Thomas, 2013. "Scale and Scope Economies and the Efficient Vertical and Horizontal Configuration of the Water Industry: A Survey of the Literature," Review of Network Economics, De Gruyter, vol. 12(1), pages 93-129, March.
    7. Steven Renzetti, 1999. "Municipal Water Supply and Sewage Treatment: Costs, Prices and Distortions," Canadian Journal of Economics, Canadian Economics Association, vol. 32(3), pages 688-704, May.
    8. W. Douglass Shaw & Mark Walker & Marnee Benson, 2005. "Treating and Drinking Well Water in the Presence of Health Risks from Arsenic Contamination: Results from a U.S. Hot Spot," Risk Analysis, John Wiley & Sons, vol. 25(6), pages 1531-1543, December.

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