DOES SOCIETY WIN OR LOSE AS A RESULT OF PRIVATIZATION? PROVISION OF PUBLIC SERVICES AND WELFARE OF THE POOR

In this paper we study the effects of water sector privatizations on consumer’s welfare in 46 municipios in Colombia. In particular, we study the impact on access, price, quality, and health. After describing the privatization process, we present evidence that suggests that the effect is, if any, small. For a more detailed analysis, and seeking robustness of our results, we use two different econometric methodologies: differences-in-differences estimation, and matching estimation, using variation across time (before and after privatization) and between treatment and control groups (privatized and non-privatized). For control variables we use variations for households and municipalities characteristics. Our main estimations show positive effects of privatizations on access, on some quality measures of water, and somehow positive effects on health, in particular on diarrhea cases in children and on a nutritional measure of weight and height of the children. We find negative effects on prices, although these effects come presumably from the elimination of cross subsidies than from the privatizations per-se. Finally, some of the effects vary depending on the technical capacity of the municipalities. In particular, access to water is similar in municipalities that privatized and municipalities that did not privatize when we compare privatized municipalities with municipalities that have technical capacity to manage the water sector in public hands. τ Felipe Barrera, currently at World Bank, formerly Deputy Director of Fedesarrollo. The views expressed here are those of the authors and are not necessarily shared by the Word Bank