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Measuring the Technical Efficiency of Municipal Water Suppliers: the Role of Environmental Factors

Congress: 2008
Author(s): Diane Dupont
Diane Dupont: Professor, Department of Economics, Brock University

Keyword(s): efficiency analysis, data envelopment analysis
AbstractPast efforts to examine the relative technical efficiency of water agencies have failed to account adequately for the role of environmental factors. This paper employs Fried et alís (1999, 2002) three-stage procedure in order to do this. The first stage employs data envelopment analysis to measure agenciesí relative technical efficiency. The second stage employs stochastic frontier and tobit models to regress efficiency scores against environmental factors that are not under the control of water agenciesí managers. The third stage reruns the DEA using adjusted inputs that reflect differences in the nature of agenciesí exogenous conditions. Data are from a cross-sectional sample of municipal water agencies operating in Ontario, Canada during 1996. Results show that the mean and standard deviation of the efficiency rankings are changed significantly by controlling for environmental factors.
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