All of the studies of water and sewerage privatizations have been discussed earlier in this chapter, so we provide only a brief recap here. Saal and Parker (2003) examine the productivity and price performance of the privatized water and sewerage companies of England and Wales after the industry was privatized and a new regulatory regime imposed in 1989. They document that labor productivity improved significantly after privatization, but find no evidence that total factor productivity grew as a direct result of the ownership change. They also find that increases in output prices have outstripped increased input prices, leading to significantly higher economic profits after privatization. Nellis (2003) also cites studies of African water privatizations that were generally perceived as unsuccessful.
On the other hand, the evidence on water privatizations in Latin America has been much more positive. With the exception of a failed water privatization in Cochabamba, Bolivia, all of the other national experiences described in McKenzie and Mookherjee (2003) showed striking increases in access to water services (usually achieved without large price increases) and Galiani, Gertler, and Schargrodsky (2002) show that Argentina's water privatizations not only increased efficiency and output but also significantly reduced child mortality by increasing access to clean water. Perhaps the best conclusion that can be drawn from all the studies examining the privatization of infrastructure companies is that ownership change tends to promote performance improvements, but that other reforms — especially promoting competition where possible and adopting an effective regulatory regime — are necessary to ensure that efficiency gains are achieved and that these gains are shared with consumers.
Was this article helpful?