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 of municipalities that continued with a public operator, and we explore five variables of interest: (i) water coverage; (ii) sewage collection; (iii) sewage treatment; (iv) average tariff; and (v) water losses. Using an empirical strategy and making improvements over previous literature, after controlling for municipality peculiarities, we adopt a difference-in-differences model with nearest neighbor matching (NNM) to evaluate private sector management impacts on these variables. We find a greater tariff increase in the first four years after a private operator's start after concession. We only identify weak evidence of greater sewage treatment increase in municipalities that change to a private operator and find no relevant or significant results for the other variables. In terms of policy, this paper contributes with the government clarifying the main benefits of privatizing water and sanitation services.

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

JEL Classification: O18, H54, L95, Q53