Billions of dollars will be spent globally to upgrade water infrastructure in the coming years. The standard economic prescription is privatization and the introduction of water markets. A major lesson from the recent privatization debacle in electricity is that prescriptions for reform must include recognition of the technology for generation, distribution and end-use. The distribution of water has public good characteristics. Alternative institutions with market power in each micro-market are compared with benchmark cases – social planning and a business-as-usual regime with distribution failure. Empirical results show that privatization need not always be Pareto-improving. The regime with market failure in distribution may be preferred to a distribution monopoly, while both may be dominated by monopoly power in the input or output markets. However, if the policy goal is to maximize the size of the grid, the distribution monopoly does best. The structure of each micro-market must be examined before choosing one institution over another.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Department of Economics, Emory University (Atlanta) in its series Emory Economics with number
0403.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Paul Joskow & Jean Tirole, 2003.
"Merchant Transmission Investment,"
Working Papers
0304, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
[Downloadable!]