Does Private Management of Water Supply Services Really Increase Prices? An Empirical Analysis in Spain

Abstract

This paper attempts to explain differences in the average price of domestic water supply services in Spain, paying special attention to the effects of privatisation of the service on price levels. The empirical analysis is based on the application of a `treatment effects' model on a sample of 53 major urban municipalities. This model accounts for the fact that municipalities do not randomly distribute themselves between a group using strictly public ownership and management and a group where all or part of the service has been delegated to a private firm. It is found that, once this endogeneity is taken into account, there seems to be a positive and significant effect of privatisation on water price levels.

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