Water utilities performance analysis in developing countries: On an adequate model for universal access

Abstract

The results of the analysis of water utility performance studies based on data envelopment analysis (DEA) can be very sensitive to the methodological approach and the variables employed. This study investigates approaches and variables for developing countries in order to identify an adequate model for universal access. Three models were developed and compared. The first used traditional variables, the second considered the quality of service variables, and the last are expanded on the second by incorporating the realization of the human right to water into efficiency estimation. Methodological approaches comprising the variable returns to scale DEA (most common for developing countries) and slack-based directional distance function (employed in this study) were also compared. The case study of 77 Brazilian water utilities suggests that a model that incorporates the objective of universal access in the efficiency estimation changes substantialy utility efficiency scores. Therefore, utilities that make investments to reach the universal access can be penalized since traditional models incorporate the expenses, but fail to capture the results. The research conclusions suggest that approaches and variable choices are likely to impact on the analysis results, misrepresenting them regardless of the purpose for using DEA in the study.

Keywords: Benchmarking; Data envelopment analysis; Human right to water; Inequality in water access; Water losses.