Impact of Public Service Quality on the Efficiency of the Water Industry: Evidence from 147 Cities in China

Abstract

Nowadays, water service marketization has become a global trend, and the quality of public services has gradually become an important factor affecting the input and output of urban water utilities. This paper defines the connotation of service quality at the technical and public aspects innovatively, builds on the service quality system of water utilities, establishes the relationship between the quality and output efficiency model, and studies the impact of service quality on the efficiency of water utilities. Then, based on 147 cities’ water supply data during the 2005–2016 period in China, the data envelopment analysis model and Tobit panel data model were used in the empirical research to measure the efficiency characterized by the quality dimension. The results show that: (1) The service quality of the water industry is reflected in two aspects: technical and publicity. At the technical level, the service quality of the water industry can be represented by the supply capacity of water and infrastructure, and at the public level, by the penetration rate. (2) The overall comprehensive efficiency of urban water utilities in China is in the middle level of 0.5–0.7, the scale efficiency is at a high level of 0.8–1, and the pure technical efficiency is relatively low. The opportunity cost of maintaining service quality in China’s water sector is 5.21% of the potential output. (3) Public service quality is significantly positively correlated with the efficiency of China’s water utilities, and the improvement of service quality will promote the improvement of efficiency.