Evaluating the water sector in Italy through a two stage method using the conditional robust nonparametric frontier and multivariate adaptive regression splines

Abstract

The aim of this paper is to assess the efficiency of the integrated water service in Italy in recent years, through a robust and flexible methodology. This paper, from a methodological point of view, enhances a "two stage" method, based on ideas suggested by Florens and Simar (2005), which estimates the efficiency frontier through conditional robust models and bypasses, at the same time, the choice of a specific functional form in the second stage; the MARS (Multivariate Adaptive Regression splines) method, in fact, provides for approximate production function using linear splines without any assumption of a functional form. Applying this specific two stage method, despite poor assumptions of the production function form, we provide an estimate for the Italian water companies; we have found spatial and dimensional patterns, especially in metropolitan vs. low density areas. © 2010 Elsevier B.V. All rights reserved.