ECONOMIES OF SCALE, DISTRIBUTION 
              COSTS AND DENSITY EFFECTS IN URBAN 
                            WATER SUPPLY  
                                      
                A spatial analysis of the role of infrastructure in urban 
                               agglomeration 
              
              
              
              
              
              
              
              
              
              
              
                 Thesis submitted for the degree of Doctor of Philosophy 
                                  (Ph.D) 
                                      
                                    by 
                                      
                         Hugh Boyd WENBAN-SMITH 
                                      
                                      
                                      
                                      
                                      
                                      
                      LONDON SCHOOL OF ECONOMICS 
                           AND POLITICAL SCIENCE 
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            Declaration 
             
            This thesis is my own work, apart from referenced quotations and 
            assistance specifically acknowledged. 
             
             
             
            (Signed): ……………………………………………………. 
             
                    (H B WENBAN-SMITH) 
             
            (Date): ………………………………….. 
             
             
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             ECONOMIES OF SCALE, DISTRIBUTION COSTS AND 
             DENSITY EFFECTS IN URBAN WATER SUPPLY: 
             A spatial analysis of the role of infrastructure in urban 
             agglomeration 
              
             Abstract 
              
             Economies of scale in infrastructure are a recognised factor in urban agglomeration. 
             Less recognised is the effect of distribution or access costs. Infrastructure can be 
             classified as: (a) Area-type (e.g. utilities); or (b) Point-type (e.g. hospitals). The former 
             involves distribution costs, the latter access costs. Taking water supply as an example of 
             Area-type infrastructure, the interaction between production costs and distribution costs 
             at settlement level is investigated using data from England & Wales and the USA.  
              
             Plant level economies of scale in water production are confirmed, and quantified.  
              
             Water distribution costs are analysed using a new measure of water distribution output 
             (which combines volume and distance), and modelling distribution areas as monocentric 
             settlements. Unit distribution costs are shown to be characterised by scale economies 
             with respect to volume but diseconomies with respect to average distance to properties. 
             It follows that higher settlement densities reduce unit distribution costs, while lower 
             densities raise them.  
              
             The interaction with production costs then means that (a) higher urban density 
             (“Densification”) is characterised by economies of scale in both production and 
             distribution; (b) more spread out settlement (“Dispersion”) leads to diseconomies in 
             distribution; (c) “Suburbanisation” (expansion into lower density peripheral areas) lies 
             in between, with roughly constant returns to scale, taking production and distribution 
             together; and (d) “Constant density” expansion leads to small economies of scale.  
             Keeping (per capita) water supply costs low thus appears to depend as much on density 
             as size. 
              
             Tentative generalisation suggests similar effects with other Area-type infrastructure 
             (sewerage, electricity supply, telecommunications); and with Point-type infrastructure 
             (such as hospitals), viewing access costs as distribution costs in reverse. It follows that 
             the presumption in urban economics that such services are always characterised by 
             economies of scale and therefore conducive to agglomeration may not be correct. 
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                     ECONOMIES OF SCALE, DISTRIBUTION COSTS AND 
                     DENSITY EFFECTS IN URBAN WATER SUPPLY: 
                     A spatial analysis of the role of infrastructure in urban 
                     agglomeration 
                      
                     Contents 
                     I. Overview: Motivation, methodology and key findings  …  p.11 
                            1. Motivation 
                            2. Research strategy 
                            3. Methodology 
                            4. Key findings 
                                  a. What is new in this thesis 
                                  b. Water production 
                                  c. Water distribution 
                                  d. Production and distribution combined 
                                  e. Wider implications of the research 
                                  f. Limitations of the research 
                            5. Outline of thesis 
                            6. Acknowledgements 
                      
                     II. Infrastructure and the urban economy                  …       p.27 
                            1. Defining infrastructure 
                            2. Infrastructure and agglomeration  
                            3. Sprawl and the cost of public services 
                            4. Types of urban infrastructure 
                                  a. Supply characteristics 
                                  b. Demand characteristics 
                                  c. Network economics 
                                  d. Summary 
                            5. Water supply as a case study of urban infrastructure 
                            6. Focus of this research 
                      
                     III. Methodological implications of the different characteristics of 
                     water production and water distribution                   ...      p.54 
                            1. Introduction 
                            2. The quasi-fixity of capital 
                            3. The (non-)separability of water production and water distribution 
                                  a. The trade-off between the costs of production and the costs of 
                                  distribution 
                                  b. Separating distribution from production using production/cost 
                                  functions 
                                  c. Proposed way forward 
                            4. Defining distribution output 
                            5. Assessing scale effects in water production and distribution 
                            6. Treatment of leakage 
                            7. Data sources 
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