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Effects of institutional arrangements in local water supply services in K orea
Author(s) -
Bae Suho,
Jeong Moongi,
Moon Seonggin
Publication year - 2015
Publication title -
papers in regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.937
H-Index - 64
eISSN - 1435-5957
pISSN - 1056-8190
DOI - 10.1111/pirs.12093
Subject(s) - productivity , business , water supply , panel data , service (business) , agricultural economics , industrial organization , economics , economic growth , environmental engineering , marketing , environmental science , econometrics
In Korea, local governments are primarily responsible for providing water supply services to citizens. Since 2004, 15 local governments have contracted this service to the K orean W ater R esources C orporation ( K ‐ W ater). This paper examines the effects of the two different institutional arrangements – direct public delivery versus contracting out to K ‐ W ater – on cost savings and productivity. To do so, it employs a hybrid cost function approach and uses the panel data covering the nine years from 2000 to 2008 in local governments. Empirical findings show mixed evidence on the effects of the two institutional arrangements on cost savings and productivity gains. W ater supply costs are significantly lower under contracting out than under direct public delivery. However, there are no significant differences in productivity gains between the two institutional arrangements. Local water supply systems need to further reduce the average water supply costs through increasing their size and magnitude.