Water utility consolidation: Are economies of scale realized?

We analyze how administrative consolidation affects the performance of water utilities using a rich dataset of more than 400 utilities in Central and Eastern Europe from 1995 to 2017. In contrast to many cross-sectional comparisons, our results from a matched difference-in-difference approach indicate that consolidations did not lead to a significant unit cost decrease. Moreover, consolidated utilities do not outperform non-consolidated utilities in the post-consolidation years, and one-off cost increases during the consolidation can even lead to cost increases. We discuss potential reasons why utilities did not achieve economies of scale and cost savings in the analyzed cases. •Consolidations may result in cost savings or not.•Economies of scale are not a sufficient condition for cost savings after a consolidation.•There is evidence of one-off cost increases during consolidations.•The design of a consolidation appears an important factor for the outcome.•Consolidations often lead to a loss in network density.