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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.

Suggested Citation

  • Auriol, Emmanuelle & Blanc, Aymeric, 2009. "Capture and corruption in public utilities: The cases of water and electricity in Sub-Saharan Africa," Utilities Policy, Elsevier, vol. 17(2), pages 203-216, June.
  • Handle: RePEc:eee:juipol:v:17:y:2009:i:2:p:203-216
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    Cited by:

    1. Antonio Carvalho, 2016. "Delays in Connecting Firms to Electricity: What Matters?," CEERP Working Paper Series 003, Centre for Energy Economics Research and Policy, Heriot-Watt University.
    2. Morgan Bazilian & Patrick Nussbaumer & Hans-Holger Rogner & Abeeku Brew-Hammond & Vivien Foster & Shonali Pachauri & Eric Williams & Mark Howells & Philippe Niyongabo & Lawrence Musaba & Brian Ó Galla, 2011. "Energy Access Scenarios to 2030 for the Power Sector in Sub-Saharan Africa," Working Papers 2011.68, Fondazione Eni Enrico Mattei.
    3. Emmanuelle Auriol & Stéphane Straub, 2011. "Privatization of Rent-Generating Industries and Corruption," Chapters,in: International Handbook on the Economics of Corruption, Volume Two, chapter 7 Edward Elgar Publishing.
    4. Emmanuelle Auriol & Pierre M. Picard, 2009. "Government Outsourcing: Public Contracting with Private Monopoly," Economic Journal, Royal Economic Society, vol. 119(540), pages 1464-1493, October.
    5. Straub, Stéphane, 2009. "Governance in Water Supply," IDEI Working Papers 544, Institut d'Économie Industrielle (IDEI), Toulouse.
    6. Maria Vagliasindi, 2011. "Public versus Private Governance and Performance: Evidence from Public Utility Service Provision," Chapters,in: International Handbook on the Economics of Corruption, Volume Two, chapter 6 Edward Elgar Publishing.
    7. Frédéric Boehm, 2011. "Is There an Anti-corruption Agenda in Regulation? Insights from Colombian and Zambian Water Regulation," Chapters,in: International Handbook on the Economics of Corruption, Volume Two, chapter 10 Edward Elgar Publishing.
    8. 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.
    9. repec:eee:enepol:v:110:y:2017:i:c:p:1-8 is not listed on IDEAS
    10. 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.
    11. Anillo, Andrea & Boehm, Frédéric & Polo-Otero, José, 2014. "Governance Matters: Universal Access to Water," MPRA Paper 54820, University Library of Munich, Germany.
    12. Daniel Camos-Daurella & Antonio Estache, 2017. "Regulating Water an Sanitation Network Services. Accounting for Institutional and Informational Constraints," Working Papers ECARES ECARES 2017-28, ULB -- Universite Libre de Bruxelles.
    13. Daniel Camos-Daurella & Antonio Estache, 2017. "Regulating Water an Sanitation Network Services. Accounting for Institutional and Informational Constraints," Working Papers ECARES ECARES 2017-28, ULB -- Universite Libre de Bruxelles.
    14. Javadi, F.S. & Rismanchi, B. & Sarraf, M. & Afshar, O. & Saidur, R. & Ping, H.W. & Rahim, N.A., 2013. "Global policy of rural electrification," Renewable and Sustainable Energy Reviews, Elsevier, vol. 19(C), pages 402-416.

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