An institutional and transaction cost analysis for the efficiency of water service in Brazilian local government consortia

Abstract

ABSTRACT In this paper, we seek to break new ground by empirically investigating the relationship between cooperating entities, local government institutions and transaction costs and its effect on cost efficiency for water services through consortia in Brazilian local government. Drawing on an institutional and transaction cost framework, our results show that the institutional arrangements employed in water service provision have had a significant effect on cost efficiency, measured by total expenditure per user, between 2011 to 2019. Through a Generalized Estimating Equations (GEE), we found that cost efficiency increases slowly for those units performing under bureaucracies and faster under public enterprises. In all instances, dedicated asset specificities and contract management complexity explained differences in water service provision cost efficiency. These findings have theoretical significance as well as significant public policy implications for intermunicipal cooperative agreements.