Thirty years after the privatisation of water. What have we learned?

Thirty years after western countries started a very ambitious privatisation program, the outcomes of its success remain controversial. In this research, we focus on the privatisation of water companies in the UK and Spain and empirically assess the economic consequences of the privatisation programs. In the UK, water companies were privatised in the late 1980s, and a regulatory framework with price caps has been established gradually at the national level. In Spain, municipalities are still in the process of privatising their water services and there is not a national regulator. First, we study the success of water privatisation in both countries in a time series perspective. Has privatization increased efficiency and productivity of the water firms? The literature has mainly focused on cross-sectional studies, with ambiguous results, and this research will contribute to the debate around the success of privatisation using panel data econometric analyses. Secondly, we study the effect of different regulatory regimes to assess its effects in promoting efficiency: both between the UK and Spain and across Spanish municipalities. Thirdly, we analyse if the privatisation process has generated monopoly profits and promoted rent-seeking behaviour on the privatised firms. This last question has not been systematically analysed in the literature and arises as one of crucial importance since monopoly power is seen as one of the main forces driving the increase in income inequality of the last decades.