The relative efficiency of public and private sector water

In this literature study the difference between public and private operators in terms of efficiency or other performance measures is investigated. It is widely assumed that the private sector is more efficient than the public sector. It is supposed that private companies have demonstrated their superiority in performance, and that this reflects the theoretically expected superiority of markets over bureaucracies under political control.
On the basis of these assumptions, current debate about policy in infrastructure and services assumes that achieving private sector operation is an objective in itself, and is always a desirable result. However, the empirical evidence and the theoretical debates do not support this assumption. The theory behind the assumption of private sector superiority is also being shown to have serious flaws.
A consistent stream of empirical evidence shows that there is no intrinsic advantage to private sector operation in terms of efficiency. There is also no evidence to assume that a public sector operator is less efficient and effective. Policy discussions should therefore be based on a strictly neutral assumption about relative efficiency, and in particular not regard introduction of private sector operation as a desirable or valuable objective. Otherwise policy decisions risk being distorted and leading to costly economic and social consequences.
Although public sector operators provide the majority of urban water supply, research and policy debate continues to focus heavily on various forms of private sector provision.