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Estimating Size and Scope Economies in the Portuguese Water Sector Using the Most Appropriate Functional Form

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  • Pedro Carvalho
  • Rui Cunha Marques

Abstract

Contrary to the usual method of most studies that apply parametric methodologies, the current study does not assume a priori a functional form to represent the cost function. Instead, a large number of functional forms are tested in order to find the most appropriate functional form for the true cost structure of utilities. The sample focuses on water utilities operating in Portugal during the period 2002–2008. The results show that there are substantial economies of output density, economies of size, and economies of scope (in the joint supply of water supply and wastewater services) and, therefore, there are huge advantages in utilities merging.

Suggested Citation

  • Pedro Carvalho & Rui Cunha Marques, 2015. "Estimating Size and Scope Economies in the Portuguese Water Sector Using the Most Appropriate Functional Form," The Engineering Economist, Taylor & Francis Journals, vol. 60(2), pages 109-137, April.
    • Handle: RePEc:taf:uteexx:v:60:y:2015:i:2:p:109-137
    DOI: 10.1080/0013791X.2013.873507
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    Cited by:

    1. Massarutto, Antonio & Grassetti, Luca & Lambardi di San Miniato, Michele & Moletta, Mattia, 2023. "Efficient firms are all alike, but every inefficient firm is such in its own way: Heterogeneity of costs determinants in the Italian water sector," Utilities Policy, Elsevier, vol. 84(C).
    2. Mydland, Ørjan & Kumbhakar, Subal C. & Lien, Gudbrand & Amundsveen, Roar & Kvile, Hilde Marit, 2020. "Economies of scope and scale in the Norwegian electricity industry," Economic Modelling, Elsevier, vol. 88(C), pages 39-46.
    3. Amaral, António L. & Martins, Rita & Dias, Luís C., 2023. "Operational drivers of water reuse efficiency in Portuguese wastewater service providers," Utilities Policy, Elsevier, vol. 83(C).
    4. Molinos-Senante, María & Maziotis, Alexandros & Sala-Garrido, Ramón, 2020. "Changes in the total costs of the English and Welsh water and sewerage industry: The decomposed effect of price and quantity inputs on efficiency," Utilities Policy, Elsevier, vol. 66(C).
    5. Anna Bottasso & Maurizio Conti, 2021. "Economie di integrazione verticale ed economie di scopo nel settore idrico e fognario: alcune considerazioni alla luce dell?evidenza empirica internazionale," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2021(3), pages 89-128.
    6. Maria Molinos-Senante & Alexandros Maziotis, 2021. "Productivity growth, economies of scale and scope in the water and sewerage industry: The Chilean case," PLOS ONE, Public Library of Science, vol. 16(5), pages 1-16, May.
    7. Giulia Romano & Andrea Guerrini & Rui Cunha Marques, 2017. "European Water Utility Management: Promoting Efficiency, Innovation and Knowledge in the Water Industry," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(8), pages 2349-2353, June.

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