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The ‘hidden costs’ of water provision: New evidence from the relationship between contracting-out and price in French water public services

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  • Simon Porcher

    (IAE Paris - Sorbonne Business School)

Abstract

In France, the management of public services such as water or sanitation can be done by the municipal council or contracted out to a private operator. This paper quantifies the impact of the choice of contracting out the management of water public services on price. It uses a unique dataset of utilities with unusual detailed financial indicators, such as debt of the water public service. We find evidence that private management is associated with higher prices on average ceteris paribus but that this difference disappears when we account for the 'hidden costs' of water, i.e. the price taking into consideration debt refunding of the public service which could increase the price in the following years. Indeed, private management is characterized by higher tariffs but lower debt level so that the price ensure the full-costs recovery while under public management, prices are set at a lower level than under private management but with a higher debt of the public service.

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  • Simon Porcher, 2017. "The ‘hidden costs’ of water provision: New evidence from the relationship between contracting-out and price in French water public services," Post-Print hal-02002309, HAL.
    • Handle: RePEc:hal:journl:hal-02002309
    Note: View the original document on HAL open archive server: https://hal.science/hal-02002309
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    Cited by:

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    2. Fu, Guanlong & Liu, Pengfei & Swallow, Stephen K., 2020. "Effectiveness of Public versus Private Ownership: Violations of the Safe Drinking Water Act (SDWA)," Agricultural and Resource Economics Review, Cambridge University Press, vol. 49(2), pages 291-320, August.
    3. Liu, Junqing & Fukushige, Mototsugu, 2020. "Efficiency and pricing of water supply and sewerage services in Japan," Utilities Policy, Elsevier, vol. 62(C).
    4. Hellwig, Michael & Polk, Andreas, 2021. "Do political links influence water prices? Determinants of water prices in Germany," Utilities Policy, Elsevier, vol. 70(C).
    5. Egüez, Alejandro, 2021. "District heating network ownership and prices: The case of an unregulated natural monopoly," Utilities Policy, Elsevier, vol. 72(C).
    6. Salazar-Adams, Alejandro, 2021. "The efficiency of post-reform water utilities in Mexico," Utilities Policy, Elsevier, vol. 68(C).
    7. Egüez, Alejandro, 2020. "Ownership and district heating prices: The case of an unregulated natural monopoly," Umeå Economic Studies 980, Umeå University, Department of Economics.

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    Keywords

    Public-private partnerships; water; contracting out; debt;
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