Does the ownership of utilities matter for social outcomes? A survey of the evidence for developing countries

ABSTRACT

This paper surveys the evidence on the relevance of the ownership choice for electricity and water and sanitation utilities with respect to access and affordability in developing countries. It shows that most of the widely quoted evidence is outdated and fails to reflect the long-term effects of choices made in the 1990s. The most recent data suggests that ownership affects social outcomes less than regulatory governance and market structure. The evidence is however not precise enough yet. More research is needed to determine how context and institutional constraints, including regulatory capacity, should influence ownership choices.

KEYWORDS:

• Privatization
• regulation
• utilities
• access
• affordability

JEL CLASSIFICATION:

• D02
• D30
• L33
• L50
• L98

Policy highlights

• Ownership choices influence access and affordability differently

• Ownership matters to social and distributional outcomes less than regulation

• The internalization of the institutional and fiscal context within ownership decisions drives social outcomes

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1. See World Bank (2019) for details.

2. We exclude qualitative studies from our survey as many leave excessive room for subjective assessments of outcomes and their drivers.

3. Some papers address this concern by adding a time trend but fail to interpret the results in terms of global social outcomes.

4. Significant reporting or publication biases may lead to the underreporting of results unsupportive of a pre-conceived idea of the expected relevance or sign of a variable.

5. The survey does not cover case studies or narrative assessments without robust statistical tests as they do not provide reliable evidence of relative performance effectiveness.

6. This category includes the use of non-parametric methods in assessments of the extent to which firms are efficient at meeting several goals jointly such as efficiency, access, and affordability targets (e.g., Grifell-Tatjé, Knox Lovell, and Sickles 2018).

7. Doll and Pachauri (2010) offer this explanation for the slow progress of obtaining access to certain services controlled by large utilities with some degree of monopoly power in Sub-Saharan Africa.

8. The quantitative studies are assessed using meta-regressions. The qualitative studies are synthesized through an iterative logic model.

9. Recently, research has focused instead on other policy options such as decentralization and the role of alternative smaller-scale providers (see Herrera 2019).

10. Secondary effects across income classes such as short-term labor reductions associated with privatization are usually ignored by econometric treatments of the data. Boccanfuso, Estache, and Savard (2009a, 2009b) and Chisari, Estache, and Romero (1999, 2007a, 2007b) find negative short-term effects on the lowest income classes associated with price increases and labor cuts.

11. Chisari, Estache, and Romero (2007a) discuss the potential use of CGEs for evaluations of regulatory decisions.

12. This has been the experience of one of the authors when working on contract (re-)negotiations and audits in Asia, Latin America, and SSA during that period.