TECHNICAL EFFICIENCY OF RURAL WATER UTILITIES

By: Bhattacharyya, Arunava; Harris, Thomas R.; Narayanan, Rangesan; Raffiee, Kambiz
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Bhattacharyya, Arunava; Harris, Thomas R.; Narayanan, Rangesan; Raffiee, Kambiz, TECHNICAL EFFICIENCY OF RURAL WATER UTILITIES, Journal of Agricultural and Resource Economics, Volume 20, Issue 2, December 1995, Pages 373-391

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Technical efficiency of rural water utilities is determined using frontier production functions. An indirect production function is developed to model the two-step production process of a local government-controlled firm. Data from 26 rural Nevada water utilities are used to estimate inefficiency in terms of firm-specific variables. A multistep estimation procedure is used instead of single-step maximum likelihood estimation. Model selection tests are used to choose the best model. Privately owned utilities are most efficient; self-governing water districts are the least efficient. Municipal governments operate the most and least efficient utilities.
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