||electricity distribution operators<br>1991|and Weyman-<br>Jones(1996)||scale efficiency on average but some public operators<br>have equivalent scores.|
|---|---|---|---|---|
|Ukraine|24<br>Ukrainian<br>electricity<br>distribution companies<br>1998-2002|Berg, Lin and<br>Tsaplin (2004)|SPF/DEA|Shows that private operators respond more aggressively<br>to incentives than do public operators. When regulation<br>hasperverse incentives efficiencyworsens.|

(*) SPF: Stochastic Production Frontier; SCF Stochastic Cost Frontier; DF: Distance Function (P= production, C=Cost); DEA: Data Envelopment Analysis.

# _3.1.2. Water and Sewerage_

While the share of contracts signed with private operators and regulated under some type of incentive based regime is about as high as it is for the energy sector in developing and transition economies, somewhat surprisingly the number of studies covering the sector is quite limited. We found 8 studies, of which only 4 are actually published and 3 more have actually been issued as working papers by an academic or official institutions. The last one is a mimeo. Table 2 shows that half the papers rely on parametric techniques, 3 on DEA and 1 on an index number. Most studies focus on the production side. Volume of water produced or sold and volume of sewerage collected or number of connections tend to be the most common output variables. A few focus on the cost side and then the issue is on what cost to focus on (operational, capital or total?).

**<u>Table 3: Water and Sewerage</u>**

|**Region**|**Data**|<br>**Reference**|<br>**Method (*)**|<br>**Policy relevance**|
|---|---|---|---|---|
|Africa|21 African water utilities,<br>including 3 private<br>1995-1997|Estache and<br>Kouassi (2002)|SPF and 2<sup>nd</sup><br>stage Tobit<br>model|Find that private operators are more cost-<br>efficient and that corruption worsens efficiency;<br>also show that corruption matters much more<br>than ownership.|
|Africa|110 African water utilities<br>1998-2001, including 14<br>private|Kirkpatrick,<br>Parker, and<br>Zhang (2004)|SCF/DEA with<br>2<sup>nd</sup>stage<br>regressions|Finds no significant difference between public<br>and private operators in terms of cost once<br>environmental factors have been accounted for.<br>Regulation has no significant impact either.|
|Asia|50 firms in 19 countries<br>1997|Estache and<br>Rossi (2002)|SCF|Find no statistically significant difference<br>between public and private operators in the<br>sector.|
|Argentina|4 provinces<br>1992-2001 (unbalanced<br>panel)|Estache and<br>Trujillo (2003)|TFP<br>|Find a significant improvement resulting from<br>the 1990s reforms in the sector.<br>Also shows that one of the renationalized<br>companies is managing to maintain private<br>gains.<br>Show that ignoring the multiproduction nature of<br>the operators business (water + sewerage) leads<br>to<br>misleading<br>policy<br>conclusion<br>on<br>the<br>performance of operators.|
|Brazil|20 state operators<br>1996-2000|Tupper and<br>Resende(2004)|DEA with 2<sup>nd</sup><br>stage Tobit<br>|Ranking of operators.<br>Makes the case foryardstick competition.|
|Brazil|Around 4000 (depending<br>on the year) municipalities<br>of Brazil<br>1996-2002|Seroa da Motta<br>and Moreira<br>(2004)|DEA with 2<sup>nd</sup><br>stage regression|Private operators stimulate catching up but there<br>is no significant difference between public and<br>private operators in terms of the total variation in<br>productivity. Regional operators benefit from<br>scale economies but have the lowest productivity<br>levels.<br>Municipalities<br>have<br>the<br>highest<br>productivitylevels.|
|Peru|43 operators<br>1996-1998|Corton (2003)|SCF|Cost models which accounts for location,<br>dispersion, size in production and size in<br>administrative responsibility (number of districts|

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