The comparative impact of privatisation and regulation on productivity growth in the English and Welsh water and sewerage industry, 1985-99

Saal, David S. and Parker, David (2004). The comparative impact of privatisation and regulation on productivity growth in the English and Welsh water and sewerage industry, 1985-99. International Journal of Regulation and Governance, 4 (2), pp. 139-170.

Abstract

After the 10 regional water authorities of England and Wales were privatized in November 1989, the successor WASCs (water and sewerage companies) faced a new regulatory regime that was designed to promote productivity growth while simultaneously improving drinking water and environmental quality. As legally mandated quality improvements necessitated a costly capital investment programme, the industry's economic regulator – the Office of Water Services – implemented a RPI + K pricing system, designed to compensate the WASCs for their capital investment programme while also encouraging faster rates of productivity growth. This paper considers the relative effects of privatization and regulation on productivity growth in the industry using both non-parametric and parametric methods to provide a crosscheck on the robustness of the results. While there is evidence that labour productivity improved after privatization, there is no evidence that privatization led to a growth in TFP (total factor productivity). However, there is some evidence of a small increase in the rate of TFP growth in the aftermath of a substantial tightening of the regulatory regime that took place in 1995. These results, therefore, are consistent with evidence from other research that privatization, in the absence of effective competition and/or regulation, is not necessarily associated with improved economic performance.

Publication DOI: https://doi.org/10.3233/IJR-120039
Divisions: Aston Business School > Economics finance & entrepreneurship
Aston Business School
Uncontrolled Keywords: Waste Management and Disposal
Full Text Link: http://iospress ... 2-4907&volume=4
Related URLs: http://www.scop ... tnerID=8YFLogxK (Scopus URL)
Published Date: 2004-12
Authors: Saal, David S.
Parker, David

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