Empirical analysis of the efficiency in local waterworks

Abstract

The purpose of this study is to measure the efficiency of local waterworks according to operation types and to derive the factors influencing the efficiency of local waterworks. For the empirical analysis, panel data on waterworks for 10 years from 2006 to 2015 is used for 128 local governments. As a result of analysis, efficiency analysis by DEA method in 2015 reveals that 26 local governments are efficient. All efficiency indexes of the contracting-out regions are higher than that those of regions operated by local governments, and the difference of efficient indexes according to operation type is statistically significant. Second, the result of dynamic analysis by DEA/Window method also shows a higher efficiency index for trustees during10 years. Last, the research confirms the influence factors such as operation type, population density, pipe length and so on which affect the efficiency of local waterworks by fixed effect model. Operation type has a positive relationship with efficiency index. It shows that contracting-out areas are more efficient than direct operation by local governments, which is robust results in various models. Pipe length and population density are both positively related to the efficiency index of local waterworks which means the economy of scale affects the efficiency index of local waterworks. Revenue rate of contracting-out regions is higher than that directly operated by local governments and rate of realization cost is also positive related with revenue rate. In the case of the total unit cost, Operation type does not have robustness, and the rate of realization cost, percentage of water produced by local governments and the population density show a significantly negative relationship. Therefore, to reduce the total unit cost, local governments should try to increase rate of realization cost and population density.