Fiscal stress and the production of public safety: A distance function approach
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2019, Utilities PolicyCitation Excerpt :To estimate the shadow price of water leakage considering the multi-output multi-input nature of the water distribution activity, we assume a translog technology and postulate an input distance function estimated using the SFA approach. This approach takes into accountrandom measurement errors in the data and the estimation of specific technology characteristics, such as returns to scale elasticities, input substitutability, cost complementarities and shadow prices (e.g., Färe et al., 1993; Grosskopf et al., 1995; Morrison Paul and Nehring, 2005). Over the last 30 years, the Chilean water industry carried out significant legal and institutional reforms to improve drinking water service and became a success example in Latin-America from the coverage and service quality perspective (Molinos-Senante, 2018).
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