Technological and operational characteristics of the Chilean water and sewerage industry: A comparison of public, concessionary and private companies

Abstract

Evaluating the technological and operational characteristics of the water and sewerage industry is interesting for researchers and policy makers. In this study an input distance function was applied to evaluate the technical efficiency, synergies between water and sewerage services, economies of scale and input substitutability for a sample of fully private, concessionary and public Chilean water companies over the years 2007–2015. The results indicate that, on average, the water industry reported high levels of technical efficiency over time. Lower costs can be achieved by forming larger companies through mergers and keeping water and sewerage companies integrated. Companies can further improve their efficiency by substituting labour with capital and operating expenses and adopting innovative strategies that allow them to manage their assets more efficiently and improve their environmental performance. The findings of this study are useful for water regulators to support decision making and introduce policies, incentives, and penalties to improve the performance of water companies over time.