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Capture and Corruption in Public Utilities: the Cases of Water and Electricity in Sub-Saharan Africa

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  • Auriol, Emmanuelle
  • Blanc, Aymeric

Abstract

The paper focuses on public utilities services located in poor countries with a special attention to capture and corruption issues. It confronts the optimal policy of Auriol and Picard [Privatization in Developing Countries and the Government Budget Constraint, Nota di Lavoro 75.2002. Fondazione Eni Enrico Mattei, Milan, Italy] regarding private sector involvement in public utilities with empirical evidence on water and electricity in Sub-Saharan Africa (SSA). As predicted by the theory, the participation of private unregulated firms in the supply of services for the middle class and poor people is fairly common in SSA. By contrast, services for rich people are provided by public utilities. Theory suggests that their prices should be high so that the public firms make a profit. Yet piped water and electricity are subsidized. This suggests that there is a problem of capture by the ruling elite. Since ruling elites design privatization programs, there is concern about their optimality. The paper shows that the social cost of corrupted privatization is non-monotone in the opportunity cost of public funds. Because of the fiscal loss it represents, privatizing profit centers of public firms entails huge social costs in very poor countries.

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Bibliographic Info

Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 505.

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Date of creation: Jan 2008
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Publication status: Published in Utilities Policy, vol.�17, n°2, juin 2009, p.�203-216.
Handle: RePEc:ide:wpaper:8927

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References

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Cited by:
  1. Pierre M. Picard & Ridwan D. Rusli, 2012. "State Owned Firms: Private Debt, Cost Revelation and Welfare," CREA Discussion Paper Series 12-10, Center for Research in Economic Analysis, University of Luxembourg.
  2. Straub, Stéphane, 2009. "Governance in Water Supply," IDEI Working Papers 544, Institut d'Économie Industrielle (IDEI), Toulouse.
  3. Gualberti, Giorgio & Alves, Luis & Micangeli, Andrea & da Graça Carvalho, Maria, 2009. "Electricity privatizations in Sahel: A U-turn?," Energy Policy, Elsevier, vol. 37(11), pages 4189-4207, November.
  4. Morgan Bazilian & Patrick Nussbaumer & Hans-Holger Rogner & Abeeku Brew-Hammond & Vivien Foster & Shonali Pachauri & Eric Williams & Mark Howells & Philippe Niyongabo & Lawrence Musaba & Brian Ó Gall, 2011. "Energy Access Scenarios to 2030 for the Power Sector in Sub-Saharan Africa," Working Papers 2011.68, Fondazione Eni Enrico Mattei.

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