Does Private Sector Participation Improve Performance in Electricity and Water Distribution?

Does Private Sector Participation Improve Performance in Electricity and Water Distribution?

by Katharina Gassner, Alexander Popov, Nataliya Pushak
     
 

‘Does Private Sector Participation Improve Performance in Electricity and Water Distribution?’ this question has proven deceptively difficult to answer in the context of utilities in developing economies. The authors examine the question of private versus public performance in a natural monopoly setting. They address the shortfalls of earlier research

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Overview

‘Does Private Sector Participation Improve Performance in Electricity and Water Distribution?’ this question has proven deceptively difficult to answer in the context of utilities in developing economies. The authors examine the question of private versus public performance in a natural monopoly setting. They address the shortfalls of earlier research and arrive at fact-based conclusions that are robust globally. Using a data set of more than 1,200 utilities in 71 developing and transition economies—the largest know data set in the area—this study finds that privately operated utilities convincingly outperform state-run ones in operational performance and labor productivity.

This book compares the change over time in performance measures for the two groups of utilities and isolates the effect of private sector participation (PSP) from time trends and firm-specific characteristics. It accounts for ex-ante difference between state-owned enterprises that were selected for PSP and those that were not, and corrects for possible bias in the estimations induced by such differences. It distinguishes between full divestitures, partial divestitures, concessions, and lease and management contracts.

The study finds no robust evidence of an increase in investment by either the public or private sectors, even if PSP leads to an increase in operational efficiency. Nor is there robust evidence of a change in average residential prices as a result of PSP. Given the well-documented underpricing of utility services in many developing countries, this result may reflect the economic and political difficulties of aligning tariffs with the costs of service provision.

This book will be of interest to people involved in sector reform and infrastructure service delivery, in particular in developing countries.

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Product Details

ISBN-13:
9780821377154
Publisher:
World Bank Publications
Publication date:
10/10/2008
Series:
Trends and Policy Options (PPIAF), #6
Pages:
116
Product dimensions:
6.00(w) x 8.80(h) x 0.40(d)

Table of Contents

Foreword ix

Acknowledgments xi

About the Authors xiii

Abbreviations xv

Overview 1

The Study 2

The Results 3

Conclusion 5

1 Introduction 7

Analytical Framework and Data 8

Empirical Approach 10

Transition Period and Contract Type 10

Limitations and Caveats 11

2 Empirical Literature 13

Techniques 13

Findings 14

3 Selection of the Sample 17

Treatment Group: Utilities with PSP 18

Control Group: State-Owned Utilities 20

Final Sample 22

4 Empirical Methodology 27

Overview of Empirical Analysis 28

Panel Data Analysis 29

Difference-in-Differences Estimation 30

5 Empirical Results 33

Electricity 39

Water 42

Sanitation 45

6 Conclusion 47

Appendixes

A Core Indicators 51

B Variable Sources, Construction, and Estimations 63

C Cox Proportionate Hazard Estimates 65

D Regression Results 69

Bibliography 87

Index 93

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