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The Link between Service Privatization and Price Distribution among Consumer Types: Municipal Water Services in the Spanish Region of Catalonia

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  • Antonio Miralles

    (Department of Economics, Boston University, 270 Bay State Road, Boston, MA 02215, USA and Department of Economic Policy, University of Barcelona, 690 Avinguda Diagonal, 08034 Barcelona, Spain)

Abstract

In the Spanish region of Catalonia the industrial sector sensibly lobbied for the privatization of municipality-produced water services in the period 1996–2002. This paper analyzes the extent to which this result is consequent with observed measures of cross-subsidies in favor of residential consumers. I run a treatment-effects regression on a sample of 133 municipalities in 2000 and 2001. Recent privatization has a positive effect on the weight that the local regulator attaches to industrial users' welfare when deciding water tariffs. I conclude that an increase of industrial customers' group size has a twofold effect on the cross-subsidy in favor of residential customers: a direct positive substitution effect and an indirect negative political support effect through lobbying for service privatization.

Suggested Citation

  • Antonio Miralles, 2008. "The Link between Service Privatization and Price Distribution among Consumer Types: Municipal Water Services in the Spanish Region of Catalonia," Environment and Planning C, , vol. 26(1), pages 159-172, February.
    • Handle: RePEc:sae:envirc:v:26:y:2008:i:1:p:159-172
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