Factors Impacting Technical Efficiency in Mexican WUOs: A DEA with a Spatial Component

Efficient urban water management is crucial for sustainability, especially in contexts such as Mexico. Therefore, assessing the performance of Water Utility Organizations (WUOs) is very important. This study assesses the technical efficiency of 49 Mexican WUOs using cross-sectional data for 2020 and investigates the effect of geographic location as a potential determinant. A two-stage approach was applied. First, Data Envelopment Analysis (DEA) oriented to inputs (under Constant (CRS) and Variable (VRS) Returns to Scale assumptions) was used to evaluate technical efficiency with input measures of employment and costs, and output measures of volume produced and population served. The second stage involved Tobit regression modeling to examine the determinants of technical inefficiency derived from the DEA (censored left at zero), testing the effect of geographic microregions. The DEA results presented a rather significant average inefficiency (mean scores of 0.73 CRS, 0.82 VRS), which implies input savings of 18–27% could still be in the shelves. Notably, the subsequent Tobit modeling found that wide geographical microregions were not statistically significant (p > 0.79) in accounting for those inefficiencies, implying zero explanatory power. The findings indicate that improvements in efficiency require going beyond broad geography to probably focus on local managerial, institutional, or operational considerations. The present study provides empirical benchmarks for Mexican WUOs and evidence on the limited role of broad geography, thereafter directing future research toward specific performance determinants.