Maurizio CONTI
Europe Economics & HERMES

Abstract: In this paper we estimate a total and a variable cost function with a SUR method to analyze economies of scale and technical change in the English water only sector over the 1995/96-2004/05 period. In particular, we jointly consider output volumes, customers numbers and area size. Both the variable and the total cost function seem to point towards the existence of unexploited economies of output, customer and spatial density, and small, but signi.cant, scale economies. The total cost function showed that negative technical change prevailed over the sample period, although at a diminishig rate. The variable cost function, which does not assume that water companies are in long run equilibrium, showed a negative technical change in the early part of the period which however turned to be positive in the last years of our sample.