Value added and productivity determinants in the water industry: panel data evidence from the West Region of Romania [articol]

Abstract

This study compares the level of value added and productivity generated by the companies activating in the water and wastewater sector and investigates their determinants. To this end, we perform a panel data analysis over the period 2007 to 2014 using firm-level data. We include in our analysis nine public companies located in four counties inside the West Region of Romania, namely Arad, Caraș-Severin, Hunedoara and Timiș. We compare a classic Pooled OLS, a fixed effect and a random effect estimator. Our static analysis shows that the value added is mainly explained by the operating revenue, profit margin and liquidity ratio. While the size of the companies positively influences the level of value added, the consumers wealthy, measured in terms of GDP per capita, has no clear influence. It appears that regional operating companies perform better compared with small firms acting at local level. A similar result is recorded when we estimate the drivers of the productivity level, measured in terms of value added per employee. We conclude that the economies of scale recorded by companies located in the main cities of the region, and an adequate financial management of these companies, both contribute to enhancing their economic performances.