Private Means Better? A Water and Sanitation Quasi-Experimental Design

Abstract

This paper compares water and sanitation services in municipalities that entered into a concession arrangement with a private operator versus those in a comparable control group that continued with a public operator. We explore five variables of interest: average tariff; water coverage; sewage collection; sewage treatment; and water losses. Our empirical strategy improves on existing techniques: after controlling for municipality idiosyncrasies, we adopt a difference-in-differences model with nearest-neighbor matching to evaluate private sector management impacts on these variables. We find a large drop in tariff after the concession switching to a private operator, but tariff increases are greater than public operator during the first four years. There is economical and statistical evidence of increasing sewage collection and treatment over time, but only economical evidence of improvements in water coverage; and no convincing evidence of reduction in water losses. The results suggest huge positive economic impact of switching services from public to private.

Keywords: Water and Sanitation; Private sector management; Treatment Effect.

JEL Classification: O18, H54, L95, Q53