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Does Society Win or Lose as a Result of Privatization? The Case of Water Sector Privatization in Colombia

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  • Mauricio Olivera
  • Felipe Barrera

Abstract

This paper studies the effects of water sector privatization on consumers’ welfare in 46 municipalities in Colombia. First, the privatization process is described. Second, the paper evaluates the impact of privatization on access, price, and quality of water as well as health outcomes using differences-in-differences methodology with variation across time (before and after privatization) and between treatment and control groups (privatized and non-privatized municipalities) and controlling for household and municipality characteristics. The results show positive effects of privatization, in particular in urban areas. There are four main results: (i) Privatization in urban areas increases access, has positive effects on the quality measured as the need for treatment and the aspect of the water (e. g. , presence of particles in the water), and improves health outcomes, as well as improves the frequency of the service for the lower quintiles. (ii) Privatization increases the price of water in the lower quintiles, although these effects may be the result of the joint implementation of privatization and the elimination of cross subsidies. (iii) In privatized municipalities with better governmental technical capacities there are positive effects on access, prices and quality. (iv) the positive effects of privatization in rural areas on the frequency of the service and on health outcomes are outweighed by negative impacts on access and prices. These results suggest that the benefits found in urban areas should be expanded to rural areas, and that the service should be more targeted toward the poorest.

Suggested Citation

  • Mauricio Olivera & Felipe Barrera, 2007. "Does Society Win or Lose as a Result of Privatization? The Case of Water Sector Privatization in Colombia," Research Department Publications 3230, Inter-American Development Bank, Research Department.
    • Handle: RePEc:idb:wpaper:3230
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    2. Marta Suárez-Varela & María los Ángeles García-Valiñas & Francisco González-Gómez & Andrés J Picazo-Tadeo, 2017. "Ownership and Performance in Water Services Revisited: Does Private Management Really Outperform Public?," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 31(8), pages 2355-2373, June.
    3. Fabio Sánchez Torres & Irina España E., 2012. "Urbanización, Desarrollo Económico y Pobreza en el Sistema de Ciudades Colombianas 1951-2005," Documentos CEDE 9821, Universidad de los Andes, Facultad de Economía, CEDE.
    4. Kosec, Katrina, 2014. "The child health implications of privatizing africa's urban water supply," Journal of Health Economics, Elsevier, vol. 35(C), pages 1-19.
    5. Fernando Borraz & Nicolás González Pampillón & Marcelo Olarreaga, 2013. "Water Nationalization and Service Quality," The World Bank Economic Review, World Bank, vol. 27(3), pages 389-412.
    6. Kosec, Katrina, 2013. "The child health implications of privatizing Africa’s urban water supply:," IFPRI discussion papers 1269, International Food Policy Research Institute (IFPRI).
    7. Diana Oliveros & Mauricio Mendoza, 2013. "¿Es la privatización la solución a los problemas de ineficiencia de las empresas públicas?: Revisión de la literatura," Revista Lebret, Universidad Santo Tomás - Bucaramanga, December.
    8. Fabio Sánchez Torres & Alexander Vega Carvajal, 2014. "Cobertura de Acueducto y Alcantarillado, Calidad del Agua y Mortalidad Infantil en Colombia, 2000-2012," Documentos CEDE 12228, Universidad de los Andes, Facultad de Economía, CEDE.
    9. Calzada, Joan & Iranzo, Susana, 2021. "Can communal systems work? The effects of communal water provision on child health in Peru," World Development, Elsevier, vol. 140(C).
    10. Claudia Marcela Granados Vergara, 2008. "¿Contribuyen las reformas al progreso social?, el caso de los servicios de acueducto y alcantarillado y la mortalidad infantil en Colombia 1990-2004," Documentos CEDE 4738, Universidad de los Andes, Facultad de Economía, CEDE.
    11. Fernando Borraz, 2011. "Water nationalization: network access, quality, and health outcomes," Working Papers 201126, Latin American and Caribbean Environmental Economics Program, revised 2011.
    12. Arthur Dassan & Joelson Oliveira Sampaio & Vinicius Augusto Brunassi Silva & Rodrigo De-Losso, 2021. "Private Means Better? A Water and Sanitation Quasi-experimental Design," Working Papers, Department of Economics 2021_22, University of São Paulo (FEA-USP).
    13. Godwin K. Vondolia & Francis Mensah Asenso-Boadi, 2016. "Private Sector Participation in the Provision of Quality Drinking Water in Urban Areas of Ghana: What Do Households Want and Can Afford?," South African Journal of Economics, Economic Society of South Africa, vol. 84(2), pages 245-259, June.
    14. Calzada, Joan & Iranzo Sancho, Susana, 2012. "Neither Private nor Public: The Effects of Communal Provision of Water on Child Health in Peru," Working Papers 2072/196649, Universitat Rovira i Virgili, Department of Economics.

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