Water Supply Vol 5 No 6 pp 251–261 © IWA Publishing 2005
Theory matters! Efficiency measurement and water utilities
J. Sauer
Center for Development Research (ZEF), University of Bonn Walter-Flex-Strasse 3 53113 Bonn, Germany, (E-mail: jsauer@uni-bonn.de)
ABSTRACT
As is the case of other infrastructure sectors the availability of efficiency estimation software based on statistical inference - freely distributed via the internet and relatively easy to use - recently inflated the number of corresponding applications in the water sector. The robustness of regulatory measures based on inferences from efficiency measures nevertheless crucially depends on theoretically well-founded estimates. This is illustrated by using an empirical example of an inconsistent technical efficiency frontier for water utilities in Germany. Keywords Efficiency measurement; microeconomic theory; water utilities
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