IDEAS home Printed from https://ideas.repec.org/a/eee/juipol/v70y2021ics0957178721000187.html
   My bibliography  Save this article

Do political links influence water prices? Determinants of water prices in Germany

Author

Listed:
  • Hellwig, Michael
  • Polk, Andreas

Abstract

We explain water prices in Germany by analyzing demand and cost drivers, governance structures and political links to local politicians. First, we find evidence for economies of scope between supply and wastewater treatment. Soil rigidity significantly influences water prices, and prices tend to be higher in municipalities with declining populations. Second, we analyze governance structures and political links between local mayors and water utilities. We find weak indication that these factors influence prices. The existence of multiple political interests in the governance bodies overseeing water utilities tends to coincide with higher prices. As most of our governance and many of our political factors lack statistical significance, we conclude that it is mainly cost and demand factors that determine prices, and political links play a minor role.

Suggested Citation

  • Hellwig, Michael & Polk, Andreas, 2021. "Do political links influence water prices? Determinants of water prices in Germany," Utilities Policy, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:juipol:v:70:y:2021:i:c:s0957178721000187
    DOI: 10.1016/j.jup.2021.101184
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0957178721000187
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jup.2021.101184?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Porcher, Simon, 2017. "The ‘hidden costs’ of water provision: New evidence from the relationship between contracting-out and price in French water public services," Utilities Policy, Elsevier, vol. 48(C), pages 166-175.
    2. Anne-Kathrin Faust & Andrea Baranzini, 2014. "The economic performance of Swiss drinking water utilities," Journal of Productivity Analysis, Springer, vol. 41(3), pages 383-397, June.
    3. Oliver Hart & John Moore, 1999. "Foundations of Incomplete Contracts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 115-138.
    4. Johannes Sauer & Klaus Frohberg, 2007. "Allocative efficiency of rural water supply – a globally flexible SGM cost frontier," Journal of Productivity Analysis, Springer, vol. 27(1), pages 31-40, February.
    5. Bel, Germà, 2020. "Public versus private water delivery, remunicipalization and water tariffs," Utilities Policy, Elsevier, vol. 62(C).
    6. Joskow, Paul L. & Rose, Nancy L., 1989. "The effects of economic regulation," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 25, pages 1449-1506, Elsevier.
    7. Michael Klien, 2015. "The political side of public utilities: How opportunistic behaviour and yardstick competition shape water prices in Austria," Papers in Regional Science, Wiley Blackwell, vol. 94(4), pages 869-890, November.
    8. Michael Zschille, 2014. "Nonparametric measures of returns to scale: an application to German water supply," Empirical Economics, Springer, vol. 47(3), pages 1029-1053, November.
    9. Hill, Andrew J. & Jones, Daniel B., 2017. "Does partisan affiliation impact the distribution of spending? Evidence from state governments’ expenditures on education," Journal of Economic Behavior & Organization, Elsevier, vol. 143(C), pages 58-77.
    10. Aude Le Lannier & Simon Porcher, 2014. "Efficiency in the public and private French water utilities: prospects for benchmarking," Applied Economics, Taylor & Francis Journals, vol. 46(5), pages 556-572, February.
    11. Michael Zschille & Matthias Walter, 2012. "The performance of German water utilities: a (semi)-parametric analysis," Applied Economics, Taylor & Francis Journals, vol. 44(29), pages 3749-3764, October.
    12. Kristof Witte & David Saal, 2010. "Is a little sunshine all we need? On the impact of sunshine regulation on profits, productivity and prices in the Dutch drinking water sector," Journal of Regulatory Economics, Springer, vol. 37(3), pages 219-242, June.
    13. Ruester, Sophia & Zschille, Michael, 2010. "The impact of governance structure on firm performance: An application to the German water distribution sector," Utilities Policy, Elsevier, vol. 18(3), pages 154-162, September.
    14. 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.
    15. Bel Germà & Fageda Xavier & E. Mildred, 2014. "Is private production of public services cheaper than public production? A meta-regression analysis of solid waste and water services," Public administration issues, Higher School of Economics, issue 3, pages 103-140.
    16. Michael Zschille, 2015. "Consolidating the water industry: an analysis of the potential gains from horizontal integration in a conditional efficiency framework," Journal of Productivity Analysis, Springer, vol. 44(1), pages 97-114, August.
    17. Pollitt, Michael G. & Steer, Steven J., 2012. "Economies of scale and scope in network industries: Lessons for the UK water and sewerage sectors," Utilities Policy, Elsevier, vol. 21(C), pages 17-31.
    18. R. Andreas Kraemer & Britta Pielen & Colette de Roo, 2007. "Regulation of Water Supply in Germany," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 5(2), pages 21-26, 07.
    19. Zschille, Michael, 2015. "Consolidating the Water Industry: an Analysis of the Potential Gains from Horizontal Integration in a Conditional Efficiency Framework," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 44(1), pages 97-114.
    20. Janice A. Beecher, 2019. "Does regulation fail or do we fail regulation?," Competition and Regulation in Network Industries, , vol. 20(3), pages 258-269, September.
    21. Abbott, Malcolm & Cohen, Bruce, 2009. "Productivity and efficiency in the water industry," Utilities Policy, Elsevier, vol. 17(3-4), pages 233-244, September.
    22. Walter, Matthias & Cullmann, Astrid & von Hirschhausen, Christian & Wand, Robert & Zschille, Michael, 2009. "Quo vadis efficiency analysis of water distribution? A comparative literature review," Utilities Policy, Elsevier, vol. 17(3-4), pages 225-232, September.
    23. Rainald Borck, 2007. "Voting, Inequality And Redistribution," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 90-109, February.
    24. R. Andreas Kraemer & Britta Pielen & Colette de Roo, 2007. "Regulation of Water Supply in Germany," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 5(02), pages 21-26, July.
    25. Caroline Stiel & Astrid Cullmann & Maria Nieswand, 2018. "Do Private Utilities Outperform Local Government‐Owned Utilities? Evidence from German Retail Electricity," German Economic Review, Verein für Socialpolitik, vol. 19(4), pages 401-425, November.
    26. Buchheim, Lukas & Fretz, Stephan, 2020. "Parties, divided government, and infrastructure expenditures: Evidence from U.S. states," European Journal of Political Economy, Elsevier, vol. 61(C).
    27. Janice A. Beecher, 2013. "What matters to performance? Structural and institutional dimensions of water utility governance," International Review of Applied Economics, Taylor & Francis Journals, vol. 27(2), pages 150-173, March.
    28. Germà Bel & Antonio Miralles, 2010. "Choosing between Service Fees and Budget Funding to Pay for Local Services: Empirical Evidence from Spain," Environment and Planning C, , vol. 28(1), pages 54-71, February.
    29. Saal, David S & Parker, David, 2001. "Productivity and Price Performance in the Privatized Water and Sewerage Companies of England and Wales," Journal of Regulatory Economics, Springer, vol. 20(1), pages 61-90, July.
    30. Niklas Potrafke, 2018. "Government ideology and economic policy-making in the United States—a survey," Public Choice, Springer, vol. 174(1), pages 145-207, January.
    31. Massimo Filippini & Nevenka Hrovatin & Jelena Zorić, 2008. "Cost efficiency of Slovenian water distribution utilities: an application of stochastic frontier methods," Journal of Productivity Analysis, Springer, vol. 29(2), pages 169-182, April.
    32. Marcela Eslava, 2011. "The Political Economy Of Fiscal Deficits: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 25(4), pages 645-673, September.
    33. Erbetta Fabrizio & Cave Martin, 2007. "Regulation and Efficiency Incentives: Evidence from the England and Wales Water and Sewerage Industry," Review of Network Economics, De Gruyter, vol. 6(4), pages 1-28, December.
    34. Peeter Peda & Giuseppe Grossi & Margo Liik, 2013. "Do ownership and size affect the performance of water utilities? Evidence from Estonian municipalities," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 17(2), pages 237-259, May.
    35. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057, Elsevier.
    36. Michael Zschille, 2014. "Marktstrukturen in der Trinkwasserversorgung," DIW Roundup: Politik im Fokus 43, DIW Berlin, German Institute for Economic Research.
    37. Silvia Pazzi & Emili Tortosa-Ausina & Meryem Duygun & Simona Zambelli, 2016. "The cost efficiency of water utilities: when does public ownership matter?," Local Government Studies, Taylor & Francis Journals, vol. 42(6), pages 980-1003, November.
    38. Stiel, Caroline & Cullmann, Astrid & Nieswand, Maria, 2018. "Do Private Utilities Outperform Local Government-Owned Utilities? Evidence from German Retail Electricity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 19(4), pages 401-425.
    39. repec:ces:ifodic:v:5:y:2007:i:2:p:14567367 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Daniel Albalate & Germà Bel & Francisco González-Gómez & José C. Hernández-Gutiérrez & Andrés J. Picazo-Tadeo, 2024. "Changing prices after the reform of local public services: remunicipalization versus privatization," Journal of Regulatory Economics, Springer, vol. 65(1), pages 1-26, June.
    2. Daniel Albalate & Germà Bel & Francisco González-Gómez & José C. Hernández-Gutiérrez & Andrés J. Picazo-Tadeo, 2023. "Remunicipalization of Local Public Services: Policy Drivers and Changing Prices," IREA Working Papers 202319, University of Barcelona, Research Institute of Applied Economics, revised Dec 2023.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alexandr Akimov & Paul Simshauser, 2018. "Performance measurement in Australian water utilities: Current state and future directions," Discussion Papers in Finance finance:201802, Griffith University, Department of Accounting, Finance and Economics.
    2. Michael Zschille, 2016. "Cost Structure and Economies of Scale in German Water Supply," Discussion Papers of DIW Berlin 1576, DIW Berlin, German Institute for Economic Research.
    3. Porcher, Simon, 2017. "The ‘hidden costs’ of water provision: New evidence from the relationship between contracting-out and price in French water public services," Utilities Policy, Elsevier, vol. 48(C), pages 166-175.
    4. Marta Suárez-Varela & María los Ángeles García-Valiñas & Francisco González-Gómez & Andrés J Picazo-Tadeo, 2017. "Ownership and Performance in Water Services Revisited: Does Private Management Really Outperform Public?," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(8), pages 2355-2373, June.
    5. Mellah, Thuraya & Ben Amor, Tawfik, 2016. "Performance of the Tunisian Water Utility: An input-distance function approach," Utilities Policy, Elsevier, vol. 38(C), pages 18-32.
    6. Michael Zschille, 2014. "Nonparametric measures of returns to scale: an application to German water supply," Empirical Economics, Springer, vol. 47(3), pages 1029-1053, November.
    7. Jinjin Zhao, 2020. "Productivity change in the privatized water sector in China (1999–2006)," Journal of Productivity Analysis, Springer, vol. 53(2), pages 227-241, April.
    8. Michael Zschille, 2014. "Marktstrukturen in der Trinkwasserversorgung," DIW Roundup: Politik im Fokus 43, DIW Berlin, German Institute for Economic Research.
    9. Zhang, Xue & Rivas, Marcela Gonzalez & Grant, Mary & Warner, Mildred E., 2021. "Water Pricing and Affordability in the US: Public vs Private Ownership," SocArXiv 7mc4r, Center for Open Science.
    10. Salazar-Adams, Alejandro, 2021. "The efficiency of post-reform water utilities in Mexico," Utilities Policy, Elsevier, vol. 68(C).
    11. Bel, Germà, 2020. "Public versus private water delivery, remunicipalization and water tariffs," Utilities Policy, Elsevier, vol. 62(C).
    12. Ferro, Gustavo & Lentini, Emilio J. & Mercadier, Augusto C. & Romero, Carlos A., 2013. "Eficiencia en la prestación de agua y saneamiento y su vinculación con regiones, propiedad e independencia de los prestadores en Brasil [Efficiency in water and sanitation providers and its links w," MPRA Paper 48247, University Library of Munich, Germany.
    13. Michael Zschille, 2015. "Consolidating the water industry: an analysis of the potential gains from horizontal integration in a conditional efficiency framework," Journal of Productivity Analysis, Springer, vol. 44(1), pages 97-114, August.
    14. Reza, Rajibur & Tularam, Gurudeo Anand & Li, Bin, 2021. "A review of global research on private investment in the water sector," Utilities Policy, Elsevier, vol. 72(C).
    15. Walter, Matthias & Cullmann, Astrid & von Hirschhausen, Christian & Wand, Robert & Zschille, Michael, 2009. "Quo vadis efficiency analysis of water distribution? A comparative literature review," Utilities Policy, Elsevier, vol. 17(3-4), pages 225-232, September.
    16. Michael Zschille, 2012. "Consolidating the Water Industry: An Analysis of the Potential Gains from Horizontal Integration in a Conditional Efficiency Framework," Discussion Papers of DIW Berlin 1187, DIW Berlin, German Institute for Economic Research.
    17. Michael Zschille & Matthias Walter, 2012. "The performance of German water utilities: a (semi)-parametric analysis," Applied Economics, Taylor & Francis Journals, vol. 44(29), pages 3749-3764, October.
    18. Zschille, Michael, 2012. "Consolidating the Water Industry: An Analysis of the Potential Gains from Horizontal Integration in a Conditional Efficiency Fr," CEPR Discussion Papers 8737, C.E.P.R. Discussion Papers.
    19. Romano, Giulia & Molinos-Senante, María & Guerrini, Andrea, 2017. "Water utility efficiency assessment in Italy by accounting for service quality: An empirical investigation," Utilities Policy, Elsevier, vol. 45(C), pages 97-108.
    20. Liu, Junqing & Fukushige, Mototsugu, 2020. "Efficiency and pricing of water supply and sewerage services in Japan," Utilities Policy, Elsevier, vol. 62(C).

    More about this item

    Keywords

    Water prices; Cost factors; Governance; Political administration;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:juipol:v:70:y:2021:i:c:s0957178721000187. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.sciencedirect.com/journal/utilities-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.