Measurement of efficiency and its drivers in the Chilean banking industry.

This paper estimates efficiency measures for the banking system in Chile for the period 2000-2019. In contrast to previous studies, we use input-distance functions, introduce the nonparametric slack-based model, and choose the intermediate inputs approach in determining inputs and outputs. Our results suggest that the Chilean system has achieved relatively high levels of efficiency, although with no significant variation over the sample period. Ownership (government, foreign and public) and size had a positive impact on efficiency. On average, mergers and acquisitions seem to have targeted highly efficient banks in order to improve the overall efficiency of the controlling institution in the short run. Other sources of efficiency gains could be an increase in bond funding or a reduction in expenses and capital holdings. The latter could be induced by deepening the local derivatives market.

Assessing the dynamic performance of water companies through the lens of service quality.

The measurement of performance within the water industry holds significant importance for policymakers, as it can help guide decision-making for future development and management initiatives. In this study, we apply data envelopment analysis (DEA) cross-efficiency techniques to evaluate the productivity change of the Chilean water industry during the years 2010-2018. Water leakage and unplanned interruptions are included in the analysis as quality of service variables. Moreover, we use cluster analysis and regression techniques to better understand what drives productivity change of water companies. The results indicate that the Chilean water industry is characterized by considerable high levels of inefficiency and low levels of productivity change. This is due to the existence of technical regress whereas gains in efficiency were small. Concessionary water companies were found to be more productive than full private and public water companies. Best and worst performers need to make efforts to reduce production costs and improve service quality. Other factors such as customer density and ownership type statistically affect productivity.

A COMPRENHESIVE ECO-EFFICIENCY ANALYSIS OF WASTEWATER TREATMENT PLANTS: ESTIMATION OF OPTIMAL OPERATIONAL COSTS AND GREENHOUSE GAS EMISSIONS.

The transition to a neutral carbon and sustainable urban water cycle requires improving eco-efficiency in wastewater treatment processes. To support decision-making based on eco-efficiency evaluations, reliable estimations are fundamental. In this study, the eco-efficiency of a sample of 109 WWTPs was evaluated using efficiency analysis tree method. It combines machine learning and linear programming techniques and therefore, overcomes overfitting limitations of non-parametric methods used by past research on this topic. Results from the case study revealed that optimal costs and greenhouse gas emissions depend on the quantity of organic matter and suspended solids removed from wastewater. The estimated average eco-efficiency is 0.373 which involves that the assessed WWTPs could save 0.32 €/m3 and 0.11 kg of CO2 equivalent/m3. Moreover, only 4 out of 109 WWTPs are identified as eco-efficient which implies that the majority of the evaluated facilities can achieve substantial savings in operational costs and greenhouse gas emissions.

A comprehensive assessment of energy efficiency of wastewater treatment plants: An efficiency analysis tree approach.

Wastewater treatment plants (WWTPs) are energy intensive facilities. Controlling energy use in WWTPs could bring substantial benefits to people and environment. Understanding how energy efficient the wastewater treatment process is and what drives efficiency would allow treating wastewater in a more sustainable way. In this study, we employed the efficiency analysis trees approach, that combines machine learning and linear programming techniques, to estimate energy efficiency of wastewater treatment process. The findings indicated that considerable energy inefficiency among WWTPs in Chile existed. The mean energy efficiency was 0.287 suggesting that energy use should cut reduce by 71.3 % to treat the same volume of wastewater. This was equivalent to a reduction in energy use by 0.40 kWh/m3 on average. Moreover, only 4 out of 203 assessed WWTPs (1.97 %) were identified as energy efficient. It was also found that the age of treatment plant and type of secondary technology played an important role in explaining energy efficiency variations among WWTPs.

Energy efficiency of drinking water treatment plants: A methodological approach for its ranking.

Drinking water treatment systems (DWTSs) are energy intensive facilities, and are an example of the water-energy nexus. Benchmarking energy efficiency is a valuable tool for improving the economic and environmental performance of such facilities. Data envelopment analysis (DEA) is typically used to assess efficiency, allocating flexible weights (FSW) to variables that maximise energy efficiency scores for each DWTS (DEA-FSW). It means that different conditions are applied to each DWTS. Moreover, the DEA-FSW approach has finite discriminatory power which limits cross-unit comparison of energy efficiency hindering the benchmarking of DWTSs. To overcome these limitations, our study explored the effect of estimating the energy efficiency scores of DWTSs by allocating common sets of weights (CSW) within DEA (DEA-CSW). This approach was applied empirically on a sample of 146 DWTSs. Evaluated DWTSs had poor energetic performance based on both DEA-FSW and DEA-CSW estimates (low energy efficiency scores: 0.329 and 0.163, respectively). Even in the optimistic scenario, the average energy efficiency score was low (0.220), with potential electricity savings of 78 % by DWTPs when energy efficient. Unlike DEA-FSW, DEA-CSW allowed energy efficient DWTSs to be distinguished from the 146 facilities. Significant differences in the weights allocated to electricity and pollutants removed from raw water were reported for both approaches, and contributed to diverging energy efficiency scores. In conclusion, this study demonstrated the relevance of using suitable methods to generate comparable results for water companies, allowing the energy performance of DWTSs to be objectively evaluated for benchmarking purposes.

Eco-efficiency assessment under natural and managerial disposability: an empirical application for Chilean water companies.

Getting a good understanding regarding the economic and environmental performance of water utilities is of great importance to achieve the goal of an efficient and sustainable industry. In this study, we apply the range adjusted measure (RAM) data envelopment analysis (DEA) model to evaluate the integrated (production and environmental) efficiency of several water utilities located in Chile. Integrated efficiency is evaluated using the concepts of natural and managerial disposability. This approach further allows us to quantify the contribution of each input and undesirable product on efficiency scores. The results highlighted that the Chilean water industry showed high levels of production and environmental efficiency over time. Under natural disposability, water utilities could control production costs to reduce water leakage and unplanned water supply interruptions by 3.3% on average. Under managerial disposability, water utilities could further cut down undesirable outputs by 1.4% on average by adopting best managerial practices. On average, potential savings in operating costs, employment, water leakage, and unplanned water supply interruptions were higher for concessionary utilities as they showed slightly lower efficiency scores than full private utilities.

Factors influencing eco-efficiency of municipal solid waste management in Chile: A double-bootstrap approach.

Improving eco-efficiency in the provision of municipal solid waste plays an important role for a sustainable economy. Eco-efficiency of municipal solid waste service providers (MSWSPs) has been generally assessed using the conventional data envelopment analysis (DEA) method. However, this approach is sensitive to data noise and has no statistical properties. To overcome these limitations, in this paper, we adopt the double-bootstrap DEA model to derive robust eco-efficiency scores. This nonparametric method allows conducting statistical inference to explore environmental factors affecting the eco-efficiency of MSWSPs. The empirical approach focused on a sample of 298 MSWSPs in Chile, a middle-income country whose policies for promoting waste recycling are incipient. The results indicated that based on the bias-corrected eco-efficiency scores, the potential saving in costs and unsorted waste could be up to 37.8% on average to generate the same level of output (recycled waste). The findings showed that dealing with data noise and uncertainly is of great importance when conducting benchmarking analysis. The region where the municipality is located, tourism, population density and waste per capita are environmental variables that significantly influenced eco-efficiency of Chilean MSWSPs. Several policy implications are discussed based on the findings of this study.

The eco-efficiency of municipalities in the recycling of solid waste: A stochastic semi-parametric envelopment of data approach.

Eco-efficiency assessment of municipal solid waste (MSW) suppliers is a useful tool in the transition to a circular economy. Furthermore, it provides evidence of the economic and environmental performance of municipalities that can be used for decision-making and/or elaboration of regulatory policies. In this study, eco-efficiency scores were computed for a sample of 140 Chilean municipalities in the provision of MSW services. In doing so, the stochastic semi-parametric envelopment of data method was applied. It is a novel technique which overcomes the limitations of parametric (stochastic frontier analysis) and non-parametric (data envelopment analysis) methods previously employed to evaluate the eco-efficiency of MSW services. The average eco-efficiency of the 140 assessed municipalities was 0.332 which indicates that they could save 66.8% of their operational costs and recycling the same amount of waste. Moreover, 61.4% of the evaluated municipalities presented an eco-efficiency score which was lower than 0.4, whereas the other municipalities (38.6% of the sample) exhibited an eco-efficiency which raged between 0.4 and 0.80. Hence, none of the municipalities assessed was identified as eco-efficient which, implies that there is room for all municipalities to reduce operational costs in the management of MSW. Population density, tourism and location of the municipality were identified as factors influencing the eco-efficiency of the municipalities in MSW management.

How much does it cost to collect recyclable and residual waste in medium-income countries? A case study in the Chilean waste sector.

Improper municipal solid waste (MSW) management leads to contamination of water, soil and air with negative impacts on human health. Moreover, not dealing with residual waste has huge implications for meeting circular economy targets. Understanding how much it costs could lead to a better quality of service and boost environmental sustainability. This study estimates an input distance function using econometric techniques to measure the technical efficiency of the MSW sector in Chile. This approach further allows us to estimate the shadow price of residual waste in terms of total costs. The results indicated that the average technical efficiency of the waste sector was 0.592. This means that the potential savings in costs and residual waste among municipalities could be at the level of 40.8%. Large divergences among municipalities were found since efficiency scores ranged between 0.029 and 0.863. It is found that for 53% of the municipalities evaluated, efficiency scores varied between 0.61 and 0.80. On average, the cost of reducing residual waste was 81.10 US $ per kilogram. This means that on average the cost of preventing one more kilogram of residual waste not being collected and recycled was 81.10 US $. It was also found that on average as population density increased, the shadow price of residual waste increased as well.Implications: The study provides a methodology that allows the policy makers to estimate the efficiency of the solid waste sector where limited available statistical data usually exists in developing and medium-income countries. They have the opportunity to understand what drives costs and identify the best and worst performers. This information is essential to develop local initiatives to enhance waste recycling and therefore, achieving the targets established at national level. Managers can also see if there are other operating factors that could influence performance such as population density. The proposed methodology allows integrating other exogenous variables that might be interesting to policy makers. For instance, a tourism index could be included in the assessment to evaluate whether tourism impacts on the efficiency of municipalities in the provision of municipal solid waste services and therefore, to analyze the implementation of an eco-tax for tourists.

Economies of integration and sources of change in productivity in the Chilean water and sewerage industry: a translog cost function approach.

This paper researches the existence of economies of scale and scope in the Chilean water and sewerage industry using a translog cost function approach over the period 2010-2017. It also provides estimates of productivity growth and its determinants, technical change and scale effect. The results suggest that on average, the water industry operates under increasing economies of scale, which implies that further increases in water companies' scale of operations may be cost beneficial. Economies of scope between water and sewerage services were found for the average company, which suggests that the joint provision of these services may lead to cost savings. An average annual productivity increase of 2.5% was reported with scale effect being the major driver. Full private companies performed better than concessionary and public water companies. The results of our study can be of greater interest to the policy-makers who want to make decisions on introducing policy reforms such as mergers, unbundling of the water and sewerage supply chain, or developing incentives to improve companies' productivity.

Measuring the overall cost efficiency of water companies and its determinants: an empirical study of stochastic frontier models.

Several methodological approaches have been applied to evaluate the performance of water companies for regulatory purposes. Performance assessment involving a long-time period is relevant to consider the heterogeneity of the water companies as many changes might have occurred across years. In this study, we applied three different parametric models to estimate cost efficiency scores for a sample of English and Welsh water companies over the years 1991-2018. Two out of three models employed allowed us to decompose overall cost efficiency (OCE) into persistent and transient cost efficiency, i.e. allow identifying the drivers of OCE. The assessment covered six price reviews, and therefore, OCE estimations were linked with water industry regulation. Results revealed that OCE scores are sensitive to model specification as the average values for models 1, 2 and 3 were 0.959, 0.514 and 0.669, respectively. Nevertheless, the three models converge in identifying the source of raw water as an environmental variable affecting OCE. Cost efficiency estimations evidenced that price reviews conducted in 1999 and 2004 were challenging for water companies as OCE scores decreased. The opposite effect was identified for the subsequent price reviews. Beyond the estimated OCE score for the empirical application carried out, this study highlights the importance of selecting robust and adequate methods to evaluate the performance of water companies considering the main objective of such evaluation.

Estimation of greenhouse gases shadow price in the English and Welsh water industry.

Moving to a more sustainable and low-carbon footprint urban water cycle is essential in the light of climate change. In this paper, we estimate the implicit cost of reducing greenhouse gas (GHG) emissions for several English and Welsh water companies from 2013 to 2019. Using econometric techniques, we compute the shadow prices of direct and indirect CO2 emissions associated with the provision of drinking water. This methodological approach also allows us to investigate the impact of a set of environmental variables on the costs of water companies and therefore on the costs of reducing GHG emissions. We then compute the returns to scale, technical change, and technical efficiency of the water companies. The empirical results show the following: (1) the average shadow price of CO2 across years was 0.114 £/kgCO2, which means that the English and Welsh water industry needs to spend an extra £0.114 in operating expenditure to prevent the emission of one kilogramme of CO2; (2) the cost of reducing GHG emissions is very variable among water companies and across years; (3) water taken from boreholes and average pumping head increases cost requirements and therefore the inefficiency of water companies; and (4) the water industry may lower its production costs and thus the costs of reducing GHG emissions by improving its daily operations and adopting new technologies. From a policy perspective, this study evidences that in the English and Welsh water industry, a market-based approach may be more suitable to reduce GHG emissions than a carbon tax policy.

Productivity growth, economies of scale and scope in the water and sewerage industry: The Chilean case.

Evaluating the performance and analyzing the cost drivers of water utilities is of great interest for water regulators and water sector managers. This study uses a quadratic cost function to investigate the existence of economies of scale and scope in the Chilean water and sewerage industry over the period 2010-2017. We also estimate and decompose productivity growth into technical change and scale efficiency change. Technical change is further broken into pure, non-neutral and scale-augmenting technical change. The results indicate that cost savings can be achieved by increases in the scale of production and the separation of water and sewerage services. Productivity progressed favorably throughout the whole period at an annual rate of 8.4%, which was attributed to the scale effect, the adoption of new technologies and a good allocation of resources. Some policy implications are finally discussed based on our findings.

The impact of greenhouse gas emissions on the performance of water companies: a dynamic assessment.

The water industry plays an important role in reducing greenhouse gas (GHG) emissions and therefore, moving to a low-carbon urban water cycle is of great importance. However, traditional performance assessment of water companies ignores GHG emissions. To overcome this limitation and to compare productivity change estimations of water companies excluding and including GHG emissions, this study computes the Luenberger productivity indicator (LPI) and the Malmquist-Luenberger productivity index (MLPI), respectively. Moreover, in a second stage, we investigate the impact of exogenous variables on environmentally sensitive productivity change estimations. The empirical application conducted for a sample of water and sewerage companies in England and Wales over the period 201-2019 has illustrated that when GHG emissions were considered in the assessment (i.e., MLPI estimations), average productivity decreased. By contrast, when productivity estimation ignored GHG emissions (i.e., LPI), average productivity increased. Hence, it is concluded that the inclusion of GHG emissions in productivity analysis impacted the results. This finding is very relevant from a policy perspective as it illustrates the importance of considering GHG emissions when evaluating the performance of water companies for regulatory purposes.

Total factor productivity assessment of water and sanitation services: an empirical application including quality of service factors.

Assessing the productivity change of water companies provides relevant information for both water regulators and companies' managers. Past research has illustrated that different indicators and indexes have been applied although not all of them are equally reliable. Thus, this study evaluates the total factor productivity (TFP) change and its drivers employing the Luenberger-Hicks-Moorsteen productivity indicator (LHMPI) including, for the first time, quality of service variables as undesirable outputs. Moreover, unlike the previous studies, LHMPI was decomposed into three drivers; namely technical change, technical efficiency change and scale efficiency change. Our empirical application conducted on a sample of Chilean water companies over 2007-2018 embracing full private water companies (FPWCs) and concessionary water companies (CWCs). Results evidenced that, on average, TFP increased at an annual rate of 2.2%, mainly due to outputs rise. The main driver of productivity growth was scale efficiency change suggesting that adjustments in the water companies' scale of operations could lead to lower operational costs. It was also evidenced that FPWCs performed better than CWCs over the period analyzed.

Measuring the marginal costs of reducing water leakage: the case of water and sewerage utilities in Chile.

Water leakage in the urban water cycle involves relevant economic, social, and environmental negative impacts. Thus, reducing water leakage is a key challenge for both water regulators and water companies. This study estimated the evolution (2007-2015) of the marginal cost of improving the quality of service in terms of water leakage in the Chilean water industry, which involves full private, concessionary, and public water companies. In water companies, management skills and efforts play an important role in meeting water leakage targets. Thus, this study employed a cost frontier model where it was assumed that unobserved management ability interacts with output and water leakage factors. The results reveal high levels of cost efficiency for the average water company. Management increases outputs and reduces water leakage and, thus, has a positive impact on costs and efficiency. The marginal cost of reducing water leakage is higher for the public water company than for private and concessionary water companies. The average estimated marginal cost of reducing water leakage was 0.349 €/m3, which means that a water company has to spend an extra 0.349 € in operating costs to avoid a cubic meter of water leakage. Some policy implications were discussed based on the results of this study.

Estimating technical efficiency and allocative distortions of water companies: evidence from the English and Welsh water and sewerage industry.

Regulated water industries need to improve their technical efficiency and allocate their resources efficiently. This is the case of the water industry in England and Wales which was privatized in 1989, and the method of price cap regulation was implemented. This study uses an input distance function system approach to estimate the technical efficiency and distortions in the choice of input mixes for the English and Welsh water and sewerage companies (WaSCs) over the years 1991-2016. The results indicated that an average WaSC was 75.3% technically efficient which means that inputs could be reduced by 24.7% keeping the level of output constant. On average, the input mix was considered to be allocated inefficiently as there was an over-utilization of capital and other inputs relative to employment. Moreover, the low degree of substitutability among inputs implied that reducing allocative inefficiency could be costly. The findings of our study is of interest to policy makers who want to implement effective policies to improve efficiency in the water industry.

The cost of reducing unplanned water supply interruptions: A parametric shadow price approach.

Water companies are responsible for supplying water to customers 24 h per day. However, due to extreme natural events and/or anthropogenic actions, water companies suffer from unplanned water supply interruptions, which directly impact customers and incur expenses by the companies. In this study, for the first time, we estimated the shadow price (or implicit cost) of unplanned water supply interruptions using stochastic frontier techniques for a sample of 21 Chilean water companies over the period of 2007-2017. The results indicate that, on average, the Chilean water company needed to spend an extra 2.547€ in operating expenditures to avoid 1 h of interruption. Average shadow price of unplanned water supply interruptions was higher for concessionary and full private companies than public ones. These findings demonstrate that the regulatory agency may need to promote effective policies and incentives to ensure and improve the continuity of the water supply. This is very relevant to the Chilean water industry, where there is an ongoing policy debate regarding the use of penalties and compensations as an incentive to avoid unplanned water supply interruptions.

Evaluating trends in the performance of Chilean water companies: impact of quality of service and environmental variables.

In monopoly services that provide drinking water, it is of paramount importance to evaluate the total factor productivity (TFP) change of water companies. Most of the previous studies have computed the Malmquist productivity index (MPI) by applying non-parametric methods. By contrast, following a pioneering approach, in this study, we estimated the MPI using a parametric method that allows us to decompose TFP change into a larger number of drivers, including exogenous and quality of service variables. An empirical application for the Chilean water industry over 2007-2015 was conducted. We found that productivity change estimates were variable across years, differentiating a first period (2007/11) in which productivity declined and a second period (2011/15) in which TFP notably improved. In both periods, scale efficiency change and input mixed effect were the main drivers of productivity change, illustrating the importance of operation scale in water companies' performance. The decomposition of the TFP change in a large number of drivers is essential to propose incentives and measures to promote productivity across time.

A metastochastic frontier analysis for technical efficiency comparison of water companies in England and Wales.

Evaluating the performance of water companies is of great importance for both water utilities and water regulators. This paper explores comparative levels of technical efficiencies and technology gap ratios with the metafrontier concept by estimating an input distance function using stochastic frontier techniques. The metafrontier framework is employed in the water services of water and sewerage companies (WaSCs) and water-only companies (WoCs) in England and Wales. The results show that the English and Welsh water industry is an efficient industry, with WaSCs more efficient than WoCs. On average, a water company can increase its technical efficiency by operating in more densely populated areas and by investing in technology to reduce bursts in water mains. We also link the efficiency results with the regulatory cycle to assess the impact of regulation on the efficiency levels of water companies.