Review of Network Economics 25 August 2012 Final Version.pdf (244.04 kB)
Scale and scope economies and the efficient vertical and horizontal configuration of the water industry: A survey of the literature
journal contributionposted on 2017-09-29, 09:53 authored by David SaalDavid Saal, Pablo Arocena, Alexandros Maziotis, Thomas TriebsThomas Triebs
This paper surveys the literature on scale and scope economies in the water and sewerage industry. The magnitude of scale and scope economies determines the cost efficient configuration of any industry. In the case of a regulated sector, reliable estimates of these economies are relevant to inform reform proposals that promote vertical (un)bundling and mergers. The empirical evidence allows some general conclusions. First, there is considerable evidence for the existence of vertical scope economies between upstream water production and distribution. Second, there is only mixed evidence on the existence of (dis)economies of scope between water and sewerage activities. Third, economies of scale exist up to certain output level, and diseconomies of scale arise if the company increases its size beyond this level. However, the optimal scale of utilities also appears to vary considerably between countries. Finally, we briefly consider the implications of our findings for water pricing and point to several directions for necessary future empirical research on the measurement of these economies, and explaining their cross country variation.
- Business and Economics
Published inReview of Network Economics
Pages93 - 129
CitationSAAL, D.S. ...et al., 2013. Scale and scope economies and the efficient vertical and horizontal configuration of the water industry: A survey of the literature. Review of Network Economics, 12(1), pp. 93-129.
- AM (Accepted Manuscript)
Publisher statementThis work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/
NotesThis paper was accepted for publication in the journal Review of Network Economics and the definitive published version is available at https://doi.org/10.1515/rne-2012-0004