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Journal of Productivity Analysis

, Volume 28, Issue 1–2, pp 127–139 | Cite as

Determining the contribution of technical change, efficiency change and scale change to productivity growth in the privatized English and Welsh water and sewerage industry: 1985–2000

  • David S. Saal
  • David Parker
  • Tom Weyman-Jones
Article

Abstract

The water and sewerage industry of England and Wales was privatized in 1989 and subjected to a new regime of environmental, water quality and RPI+K price cap regulation. This paper estimates a quality-adjusted input distance function, with stochastic frontier techniques in order to estimate productivity growth rates for the period 1985–2000. Productivity is decomposed so as to account for the impact of technical change, efficiency change, and scale change. Compared with earlier studies by Saal and Parker [(2000) Managerial Decision Econ 21(6):253–268, (2001) J Regul Econ 20(1): 61–90], these estimates allow a more careful consideration of how and whether privatization and the new regulatory regime affected productivity growth in the industry. Strikingly, they suggest that while technical change improved after privatization, productivity growth did not improve, and this was attributable to efficiency losses as firms appear to have struggled to keep up with technical advances after privatization. Moreover, the results also suggest that the excessive scale of the WaSCs contributed negatively to productivity growth.

Keywords

Water Productivity Efficiency Privatization Price cap regulation Environmental qualify 

JEL Classification

D24 L95 L33 L51 

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Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  • David S. Saal
    • 1
  • David Parker
    • 2
  • Tom Weyman-Jones
    • 3
  1. 1.Economics and Strategy Group & Centre for Perfomance Measurement and ManagementAston Business SchoolBirminghamUK
  2. 2.Cranfield Centre for Competition and Regulation ResearchCranfield University School of ManagementCranfieldUK
  3. 3.Department of EconomicsLoughborough UniversityLoughboroughUK

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