The ’Hidden Costs’ of Water Provision: New Evidence from the Relationship between Contracting-Out and Price in French Water Public Services
21 Pages Posted: 14 Feb 2019
Date Written: December 1, 2017
In France, the management of public services such as water or sanitation can be done by the municipal council or contracted out to a private operator. This paper quantifies the impact of the choice of contracting out the management of water public services on price. It uses a unique dataset of utilities with unusual detailed financial indicators, such as debt of the water public service. We find evidence that private management is associated with higher prices on average ceteris paribus but that this difference disappears when we account for the ’hidden costs’ of water, i.e. the price taking into consideration debt refunding of the public service which could increase the price in the following years. Indeed, private management is characterized by higher tariffs but lower debt level so that the price ensure the full-costs recovery while under public management, prices are set at a lower level than under private management but with a higher debt of the public service.
Keywords: public-private partnerships, water, contracting out, debt, public services
JEL Classification: L14, L33, L95
Suggested Citation: Suggested Citation