IDEAS home Printed from
   My bibliography  Save this paper

Electoral Opportunism And Water Pricing With Incomplete Transfer Of Control Rights


  • Francisco González-Gómez

    (Department of Applied Economics. University of Granada; and Water Research Institute, Spain)

  • Andrés J. Picazo-Tadeo

    (Department of Applied Economics II. University of Valencia; and Joint Research Group INTECO, Spain)

  • Marta Suárez-Varela

    (Department of Economic Structure and Development Economics. Autonomous University of Madrid, Spain)


One of the forms of intervention in public services that lie beyond market forces is price control. While such regulation is justified by the need to achieve social goals, empirical evidence has shown that it is often used by politicians for electoral gain. This paper looks for evidence of opportunistic political behaviour in urban water pricing. Using data for 119 large Spanish cities covering the period 1998-2015, we find strong empirical evidence of the influence of the electoral cycle on water pricing insofar as price increases are significantly lower in the years preceding municipal elections than in non-pre-election years. Furthermore, outsourcing water service provision does not mitigate the relationship between the electoral cycle and water pricing. This result could be explained by incomplete transfer of control rights when the urban water service is outsourced, which allows politicians to use their right to supervise water tariffs to their advantage.

Suggested Citation

  • Francisco González-Gómez & Andrés J. Picazo-Tadeo & Marta Suárez-Varela, 2019. "Electoral Opportunism And Water Pricing With Incomplete Transfer Of Control Rights," Working Papers 1917, Department of Applied Economics II, Universidad de Valencia.
  • Handle: RePEc:eec:wpaper:1917

    Download full text from publisher

    File URL:
    File Function: First version, 2019
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Alberto Alesina & Gerald D. Cohen & Nouriel Roubini, 1992. "Macroeconomic Policy And Elections In Oecd Democracies," Economics and Politics, Wiley Blackwell, vol. 4(1), pages 1-30, March.
    2. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    3. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    4. Eric Dubois, 2016. "Political business cycles 40 years after Nordhaus," Public Choice, Springer, vol. 166(1), pages 235-259, January.
    5. Francisco González-Gómez & Miguel GarcíA-Rubio & Jorge Guardiola, 2012. "Urban Water Service Policies and Management in Spain: Pending Issues," International Journal of Water Resources Development, Taylor & Francis Journals, vol. 28(1), pages 89-106.
    6. Céline Nauges & Caroline Berg, 2008. "Economies of density, scale and scope in the water supply and sewerage sector: a study of four developing and transition economies," Journal of Regulatory Economics, Springer, vol. 34(2), pages 144-163, October.
    7. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01291401, HAL.
    8. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    9. Michael Klien, 2015. "The political side of public utilities: How opportunistic behaviour and yardstick competition shape water prices in Austria," Papers in Regional Science, Wiley Blackwell, vol. 94(4), pages 869-890, November.
    10. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    11. Vanessa Valero, 2015. "Les écarts de prix de l'eau en France entre les secteurs privé et public," Revue économique, Presses de Sciences-Po, vol. 66(6), pages 1045-1066.
    12. Germà Bel & Francisco González-Gómez & Andrés J Picazo-Tadeo, 2015. "Does market concentration affect prices in the urban water industry?," Environment and Planning C, , vol. 33(6), pages 1546-1565, December.
    13. Serge Garcia & Alban Thomas, 2001. "The Structure of Municipal Water Supply Costs: Application to a Panel of French Local Communities," Journal of Productivity Analysis, Springer, vol. 16(1), pages 5-29, July.
    14. Agenor, Pierre-Richard & Asilis, Carlos M., 1997. "Price controls and electoral cycles," European Journal of Political Economy, Elsevier, vol. 13(1), pages 131-142, February.
    15. Eric Dubois, 2016. "Political Business Cycles 40 Years after Nordhaus," Post-Print hal-01291401, HAL.
    16. Boycko, Maxim & Shleifer, Andrei & Vishny, Robert W, 1996. "A Theory of Privatisation," Economic Journal, Royal Economic Society, vol. 106(435), pages 309-319, March.
    17. Andrés Picazo-Tadeo & Francisco González-Gómez & Jorge Wanden-Berghe & Alberto Ruiz-Villaverde, 2012. "Do ideological and political motives really matter in the public choice of local services management? Evidence from urban water services in Spain," Public Choice, Springer, vol. 151(1), pages 215-228, April.
    18. Bottasso, Anna & Conti, Maurizio, 2009. "Scale economies, technology and technical change in the water industry: Evidence from the English water only sector," Regional Science and Urban Economics, Elsevier, vol. 39(2), pages 138-147, March.
    19. Eshien Chong & Freddy Huet & Stéphane Saussier & Faye Steiner, 2006. "Public-Private Partnerships and Prices: Evidence from Water Distribution in France," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 29(1), pages 149-169, September.
    20. García-Valiñas, María de los Ángeles & González-Gómez, Francisco & Picazo-Tadeo, Andrés J., 2013. "Is the price of water for residential use related to provider ownership? Empirical evidence from Spain," Utilities Policy, Elsevier, vol. 24(C), pages 59-69.
    21. Michael Klien, 2014. "Corporatization and the Behavior of Public Firms: How Shifting Control Rights Affects Political Interference in Water Prices," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(4), pages 393-422, June.
    22. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    23. Klien, Michael, 2014. "Tariff increases over the electoral cycle: A question of size and salience," European Journal of Political Economy, Elsevier, vol. 36(C), pages 228-242.
    24. Silvia Pazzi & Emili Tortosa-Ausina & Meryem Duygun & Simona Zambelli, 2016. "The cost efficiency of water utilities: when does public ownership matter?," Local Government Studies, Taylor & Francis Journals, vol. 42(6), pages 980-1003, November.
    25. Andrei Shleifer & Robert W. Vishny, 1994. "Politicians and Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 995-1025.
    26. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    27. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
    28. Emilio J. de la Higuera-Molina & Ana M. Plata-Díaz & Antonio M. López-Hernández & José L. Zafra-Gómez, 2019. "Dynamic-opportunistic behaviour in local government contracting-out decisions during the electoral cycle," Local Government Studies, Taylor & Francis Journals, vol. 45(2), pages 175-195, March.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Alexandre Mayol & Stéphane Saussier, 2020. "Retaking Control of Local Public Services A Step-by-Step Strategy," Working Papers of BETA 2020-43, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    2. María Á. García-Valiñas & Roberto Martínez-Espiñeira & Marta Suárez-Varela Maciá, 2021. "Price and Consumption Misperception Profiles: The Role of Information in the Residential Water Sector," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 80(4), pages 821-857, December.
    3. Albalate, Daniel & Bel, Germà & González-Gómez, Francisco & Picazo-Tadeo, Andrés J., 2022. "Legislative reforms and market dynamics in the provision of urban water service by private contract operators in Spain," Utilities Policy, Elsevier, vol. 74(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Milan Bednař, 2019. "Political Budget Cycles in the European Union: New Evidence of Fragmentation," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 69(4), pages 523-547, December.
    2. Bousmah, Marwân-al-Qays & Iwuji, Collins & Okesola, Nonhlanhla & Orne-Gliemann, Joanna & Pillay, Deenan & Dabis, François & Larmarange, Joseph & Boyer, Sylvie, 2022. "Costs and economies of scale in repeated home-based HIV counselling and testing: Evidence from the ANRS 12249 Treatment as Prevention trial in South Africa," Social Science & Medicine, Elsevier, vol. 305(C).
    3. Boukari, Mamadou & Veiga, Francisco José, 2018. "Disentangling political and institutional determinants of budget forecast errors: A comparative approach," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 1030-1045.
    4. Marwan-Al-Qays Bousmah & Collins Iwuji & Nonhlanhla Okesola & Joanna Orne-Gliemann & Deenan Pillay & Francois Dabis & Joseph Larmarange & Sylvie Boyer, 2022. "Costs and economies of scale in repeated home-based HIV counselling and testing: Evidence from the ANRS 12249 treatment as prevention trial in South Africa," Post-Print hal-03701046, HAL.
    5. Andreas P. Kyriacou & Tomohito Okabe & Oriol Roca‐Sagalés, 2022. "Conditional political budget cycles: The role of time preference," Economics and Politics, Wiley Blackwell, vol. 34(1), pages 67-91, March.
    6. Frigerio, Marco & Vandone, Daniela, 2020. "European development banks and the political cycle," European Journal of Political Economy, Elsevier, vol. 62(C).
    7. Zheng, Xinye & Li, Fanghua & Song, Shunfeng & Yu, Yihua, 2013. "Central government's infrastructure investment across Chinese regions: A dynamic spatial panel data approach," China Economic Review, Elsevier, vol. 27(C), pages 264-276.
    8. Martin Andersson & Hans Lööf, 2009. "Learning‐by‐Exporting Revisited: The Role of Intensity and Persistence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(4), pages 893-916, December.
    9. Abdelraouf, Nadine & Noureldin, Diaa, 2022. "The impact of the exchange rate regime on the dispersion of the price-change distribution: Evidence from a large panel of countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 76(C).
    10. Emna Trabelsi, 2022. "Macroprudential Transparency and Price Stability in Emerging and Developing Countries," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 11(1), pages 105-129.
    11. Schneider, Sophie Therese, 2018. "North-South trade agreements and the quality of institutions: Panel data evidence," Hohenheim Discussion Papers in Business, Economics and Social Sciences 27-2018, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    12. Dreher, Axel & Vaubel, Roland, 2009. "Foreign exchange intervention and the political business cycle: A panel data analysis," Journal of International Money and Finance, Elsevier, vol. 28(5), pages 755-775, September.
    13. Schuster, Monica & Maertens, Miet, 2012. "Private Food Standards and Firm-Level Trade Effects: A Dynamic Analysis of the Peruvian Asparagus Export Sector," Working Papers 146521, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.
    14. Piotr Gretszel & Henryk Gurgul & £ukasz Lach & Stefan Schleicher, 2020. "Testing for the economic and environmental impacts of EU Emissions Trading System: A panel GMM approach," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 21(2), pages 99-125.
    15. Albaladejo, Isabel P. & González-Martínez, María Isabel & Martínez-García, María Pilar, 2016. "Nonconstant reputation effect in a dynamic tourism demand model for Spain," Tourism Management, Elsevier, vol. 53(C), pages 132-139.
    16. Yerrabati, Sridevi, 2022. "Does vulnerable employment alleviate poverty in developing countries?," Economic Modelling, Elsevier, vol. 116(C).
    17. Orkhan Nadirov & Bruce Dehning, 2020. "Tax Progressivity and Entrepreneurial Dynamics," Sustainability, MDPI, vol. 12(9), pages 1-21, April.
    18. Lorenzo Pozzi & Griet Malengier, 2007. "Certainty Equivalence and the Excess Sensitivity of Private Consumption," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(7), pages 1839-1848, October.
    19. Rahman, Mizanur, 2008. "The Impact of a Common Currency on East Asian Production Networks and China’s Exports Behavior," MPRA Paper 13931, University Library of Munich, Germany.
    20. Johanna Vogel, 2012. "Agglomeration and Growth: Evidence from the Regions of Central and Eastern Europe," ERSA conference papers ersa12p1089, European Regional Science Association.

    More about this item


    Electoral cycle; privatization; political opportunism; quantitative analysis; Spain; urban water pricing;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eec:wpaper:1917. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Vicente Esteve (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.