Performance of the Tunisian Water Utility: An input-distance function approach

• The first empirical study examines the performance pattern in Tunisian drinking water industry.
• The technical efficiency increased at 0.86% per year over 1999 to 2009 period; A substantial potential for input usage reduction remains.
• TFP has grown by 6.2% over the period of analysis.
• Technical efficiency change contributes the most to TFP change; Technological regression hindered productivity growth.

The main objective of this paper is to analyse the performance pattern in the Tunisian drinking water industry. The industry is a state monopoly, administered by the Tunisian Water Utility (TWU) since 1968. We apply the stochastic distance frontier method to TWU data over a period of 11 years, from 1999 to 2009. This approach is used to estimate water production technology, to measure technical efficiency levels and total factor productivity growth, and to investigate the factors influencing efficiency levels and those driving productivity growth. The results suggest that performance-based regulation can improve efficiency and enhance productivity in the Tunisian water industry.