Does Private Sector Participation Improve Performance in Electricity and Water Distribution?
Whether privately managed utilities outperform those run by the state is an old question. What makes it difficult to answer is that utilities such as water and electricity distribution companies do not operate in competitive markets, where a change from public to private management is expected to lead to cost savings and efficiency gains driven by the profit motive. Indeed, studies looking at priva tized firms operating in competitive markets have reported increases in labor productivity, output, and investment and improvements in service quality.