Comparative analysis of private and public provision of the water and waste services by the Italian municipalities

Abstract

This paper investigates the behavior of private and publicly-owned corporations providing services in local industries that have undergone restructuring interventions since the Nineties in order to promote market contestability. Based on the approaches arising from the transaction costs theory, the paper proposes a comparative analysis of the economic and financial efficiency of a sample of local utilities supplying services in the water and waste industries, observed from 2008 to 2010. The efficiency analysis is achieved by measuring the distance from the stochastic frontier of the production costs of each firm, and the financial efficiency analysis through statement ratios. The findings of the study generally confirm the implications of the transaction costs approach and they show a wide convergence trend between privately and publicly owned organizations for the degree of utilization of input as well as for the financial efficiency analysis. There are sometimes slight differentials on the part of public companies, especially for the larger ones, which can be largely explained by the existence of more stringent welfare-oriented objectives.