On wets and drys

It’s often alleged that water privatization hurts the poor. I have to confess that this was also my prior. But perhaps we should think again, since the best study on the topic finds exactly the opposite.

Water for Life: The Impact of the Privatization of Water Services on Child Mortality
Sebastian Galiani, Paul Gertler, and Ernesto Schargrodsky
While most countries are committed to increasing access to safe water and thereby reducing child mortality, there is little consensus on how to actually improve water services. One important proposal under discussion is whether to privatize water provision. In the 1990s Argentina embarked on one of the largest privatization campaigns in the world, including the privatization of local water companies covering approximately 30 percent of the country’s municipalities. Using the variation in ownership of water provision across time and space generated by the privatization process, we find that child mortality fell 8 percent in the areas that privatized their water services and that the effect was largest (26 percent) in the poorest areas. We check the robustness of these estimates using cause-specific mortality. While privatization is associated with significant reductions in deaths from infectious and parasitic diseases, it is uncorrelated with deaths from causes unrelated to water conditions.

(And yes, this article has been around for a while – I’m merely posting on it because I noticed that the JPE site had it up as free content.)

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6 Responses to On wets and drys

  1. Russell Hamilton says:

    While thinking again, consider what happened in Bolivia:

    http://www.watermagazine.com/secure/private.htm

  2. Ben says:

    Enron, Worldcom, HIH……throw water into the mix. Hmmmm.

    Water, air, blue sky- all part of the global commons.

  3. Christine says:

    The interesting part is that the poorest benefited most – but as long as average quality of water delivered went up, this is probably inevitable. I would think though that you’d want some strong regulation plus big penalties for screwing up. Would it also matter if there was regional concentration in incomes? Ie if all the rich guys lived in one area and were with one company and all the poor guys lived in another company’s jurisdiction, would this still hold? Also, how bad/corrupt was the government-provided system? It seems to me that finding privatisation works isn’t enough – got to think about why it worked so we can design privatisations that work elsewhere. (But I should actually read the full article.)

  4. Andrew Leigh says:

    Ben, I’m asking this question because I’m genuinely curious, not point-scoring. Is there any economic evidence that would change your mind on this issue?

  5. Ben says:

    Andrew,

    Despite my churlish post, I am open minded to market involvement in water supply. The article you posted is very persuasive and the falls in mortality in poor areas are very large.

    The sky has not fallen in with the privatisation of electricity and gas supply in Australia. Regarding water, I guess I would like to see further evidence from a variety of different countries. I tend to think that there are many different ways of dealing with water which may suit different societies. I do worry that a handful of corporates could end up dominating world water supply and distribution (as in many other industries) and worry that the profit/growth motive may eventually cause some harm and loss of local control. Heavy regulation would be necessary. There are some suggestions of major price hikes +/- degraded water quality in places such as Atlanta USA, Bolivia, Ghana and (for a time) the UK.

    My own preference is for a much more decentralised approach to water. Local collection (tanks etc.) and re-use /recycling seems sensible to me.

  6. Sacha Blumen says:

    Ben’s comment touches upon an interesting part of how many people on the “left” traditionally approach essential services such as water supply & distribution, whereby because it is so important, it cannot be left to a market to ensure that whatever standards of water supply & distribution a society requires are met, due to the risk of the market failing. I felt like this. However, this approach must really be met with a further thought that perhaps different, perhaps better, methods of ensuring water supply and distribution (say) are possible. It is a mistake to not consider other possibilities.

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