Efficiency in the Brazilian sanitation sector

This paper examines the relative efficiency of Regional (state) and three different types of local (municipal) enterprises in providing water and sewerage services in Brazil between 2000 and 2004. First, a cost function is estimated employing a fixed effects panel data model. Second, the firm-specific costs from the first stage are explained by means of firm-type indicator variables. The results show that the Regional state-owned providers have the lowest firm-specific costs, reinforcing the savings they achieve from actual economies of scale. The study also shows that local Private operators have similar firm-specific costs than local Public-Corporative providers, while local Public-Non-Corporative providers have the highest firm-specific costs.