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Title: Scale and scope economies and the efficient vertical and horizontal configuration of the water industry: A survey of the literature
Authors: Saal, David S.
Arocena, Pablo
Maziotis, Alexandros
Triebs, Thomas P.
Keywords: Water utilities
Scale
Scope and integration economies
Unbundling
Issue Date: 2013
Publisher: De Gruyter
Citation: SAAL, 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.
Abstract: 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.
Description: This 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
Version: Accepted for publication
DOI: 10.1515/rne-2012-0004
URI: https://dspace.lboro.ac.uk/2134/26746
Publisher Link: https://doi.org/10.1515/rne-2012-0004
Appears in Collections:Published Articles (Economics)

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