Public Management Versus Private Management in the Provision of Drinking Water: What is the Cheapest?

  • Bernardino Benito University of Murcia, Faculty of Economics and Business
  • María-Dolores Guillamón University of Murcia, Faculty of Economics and Business
  • Ana-María Ríos University of Murcia, Faculty of Economics and Business
Keywords: municipal public services, outsourcing, public management, drink water supply


Advocates of the privatisation/outsourcing of public sector services defend the cost savings and greater efficiency derived from this type of management. In this sense, many local governments have opted to outsource the provision of some public services. However, empirical evidence for cost savings in the provision of public services is mixed. Accordingly, we analyze if the effective cost of drinking water provision depends on the type of management carried out by the local government for a sample of more than 3,500 Spanish municipalities. We find that provision of drinking water is cheaper if it is managed directly by the local government. Therefore, our results suggest that the provision of services privately does not always guarantee cost savings.


Ashworth, J.; Geys, B. & Heyndels, B. (2005) Government Weakness and Local Public Debt Development in Flemish Municipalities, International Tax and Public Finance, 12, pp. 395-422.

Audit Commission (1995). Making Markets: a Review of the Audits of the Client Role for Contracted Services (London: HMSO).

Babiano, L. (2012) La privatización del agua en España, Revista El Ecologista, nº 72, avalaible at: (December 12, 2017)..

Bastida F. (2016) Privatization in Local Governments, In: Farazmand A. (eds.) Global Encyclopedia of Public Administration, Public Policy, and Governance (Cham: Springer).

Bel, G. & Miralles, A. (2001) Factores determinantes de la privatización de la recogida de residuos sólidos urbanos. Comunicación presentada a la XXVII Reunión de Estudios Regionales. Madrid: noviembre de 2001.

Bel, G. & Fageda, X. (2007) Why Do Local Governments Privatise Public Services? A Survey of Empirical Studies, Local Government Studies, 33 (4), pp. 517–534.

Bel, G.; Fageda, X. & Warner, M. E. (2010). Is private production of public services cheaper than public production? A meta‐regression analysis of solid waste and water services, Journal of Policy Analysis & Management, 29 (3), pp. 553-577.

Bel, G., Fageda, X. & Mur, M. (2014) Does Cooperation Reduce Service Delivery Costs? Evidence from Residential Solid Waste Services, Journal of Public Administration, Research and Theory, 24 (1), pp. 85-107.

Bel, G. & Warner, M. (2015). Inter-municipal cooperation and costs: Expectations and evidence, Public Administration, 93(1), pp. 52-67.

Bel, G. & Warner, M. (2016) Factors explaining inter-municipal cooperation in service delivery: A Meta-regression analysis, Journal of Economic Policy Reform, 19(2), pp. 91-115.

Benítez, B. (2015) El bastión de la gestión privada del agua en España se tambalea, available at: (May 4, 2016).

Benito, B.; Guillamón, M. D. & Bastida, F. (2015) Public versus Private in Municipal Services Management, Lex Localis – Journal of Local Self-Government, 13(4), pp. 995-1018.

Bel, G., Fageda, X. & Warner, M. (2010) Is private production of public services cheaper than public production? A meta-regression analysis of solid waste and water services, Journal of Policy Analysis and Management, 29, pp. 553–577.

Bovaird, T. (2016) The ins and outs of outsourcing and insourcing: what have we learnt from the past 30 years?, Public Money & Management, 36(1), pp. 67–74.

Brown, T. L. & Potoski, M. (2005) Transaction costs and contracting: The practitioner perspective, Public Performance & Management Review, 28(3), pp. 326-351.

Christoffersen, H. & Paldam, M. (1998) Markets and municipalities. A study of the behaviour of the Danish municipalities. Working Paper nº 1998-3 (Dinamarca: University of Aarhus).

da Cruz, N. F., Simões, P. & Marques, R. C. (2013) The hurdles of local governments with PPP contracts in the waste sector, Environment and Planning C: Politics and Space, 31(2), pp. 292–307.

Dnes, A. W. (1995) Franchising and Privatization (Washington, DC: The World Bank).

Domberger, S. & Rimmer, S. (1994) Competitive Tendering and Contracting in the Public Sector: a Survey, International Journal of the Economics of Business, 1(3), pp. 439-453.

Domberger, S. & Jensen, P. (1997) Contracting out by the public sector: theory, evidence, prospects, Oxford Review of Economic Policy, 13(4), pp. 67-78.

Donahue, J. D. (1991) La decisión de privatizar. Fines públicos y medios privados (Barcelona: Ediciones Paidós Ibérica).

Dubin, J. & Navarro, P. (1988) How Markets for Impure Public Goods Organize: The Case of Household Refuse Collection, Journal of Law, Economics and Organization, 4 (2), pp. 217–241.

Ferlie, E., Ashburner, L., Fitzgerald, L. & Pettigrew, A. (1996) The New Public Management in action (Oxford: Oxford University Press).

Ferris, J. M. & Graddy, E. (1991) Production Costs, Transportation Costs and Local Government Contractor Choice, Economic Inquiry, 24(3), pp. 541-554.

Girth, A. M., Hefetz, A., Johnston, J. M. & Warner, M. E. (2012) Outsourcing public service delivery: management responses in noncompetitive markets, Public Administration Review, 72(6), pp. 887–900.

González-Gómez, F. & Guardiola, J. (2009) A Duration Model for the Estimation of the Contracting Out of Urban Water Management in Southern Spain, Urban Affairs Review, 44 (6), pp. 886–906.

González-Gómez, F., Picazo-Tadeo, A. J. & Guardiola, J. (2011) Why Do Local Governments Privatise the Provision of Water Services? Empirical Evidence from Spain, Public Administration, 89(2), pp. 471–492.

Greve, C. (2008) Contracting for public services (London: Routledge).

Guthrie, J., Olson, O. & Humprhey, C. (1999) Debating developments in New Public Financial Management: the limits of global theorising and some new ways forward, Financial Accountability & Management, 15(3), pp. 209-228.

Hefetz, A. & Warner, M. E. (2012) Contracting or Public Delivery? The importance of service, market and management characteristics, Journal of Public Administration, Research and Theory, 22(2), pp. 289-317.

Hodge, G. A. (1998) Contracting Public Sector Services: A Meta-Analytic Perspective of the International Evidence, Australian Journal of Public Administration, 57(4), pp. 98-110.

Hood, C. (1995) Emerging Issues in Public Administration. Public Administration, 73(1), pp. 165-183.

Johnstone, D. (2002) Public Sector Outsourcing as an exchange option, Abacus, 38(2), pp. 153-176.

Kruskal, W. H. & Wallis, W. A. (1952) Use of Ranks in One-Criterion Variance Analysis, Journal of the American Statistical Association, 47, pp. 583-621.

Lapsley, I. (1999). Accounting and the New Public Management: instruments of substantive efficiency or a rationalising modernity?, Financial Accountability & Management, 15(3), pp. 201-207.

Lopez de Silanes, F.; Shleifer, A. & Vishny, R. (1997) Privatization in the United States, Rand Journal of Economics, 28(3), pp. 447-471.

McDonald, D.A., Hoedeman, O. & Kishimoto, S. (2012) Chapter 1. In: Pigeon, M. (ed.), Remunicipalisation: putting water back into public hands (Amsterdam: Transnational Institute).

Mcguire, R. A., Ohsfeldt, R. T. & Van Cott, T. N. (1987) The determinants of the choice between public and private production of a publicly funded service, Public Choice, 54(3), pp. 211-230.

Montesinos, V. & Gimeno, A. (1998) Contabilidad y Control en el marco de La Nueva Gestión Pública. IV Jornada de Trabajo sobre Contabilidad de Costes y Gestión, ASEPUC, Universitat Jaime I, Castelló de la Plana.

Nelson, M. A. (1997) Municipal government approaches to service delivery: an analysis from a transactions cost perspective, Economic Inquiry, 35, pp. 82-96.

OECD (1995) Governance in transition: public management reforms in OECD countries (Paris: OECD).

OECD (1997) Contracting Out Government Services: Best Practice Guidelines and Case Studies. Occasional Papers nº 20 (París: OECD).

Osborne, D. & Gaebler, T. (1993) Reinventing government: how the entrepreneurial spirit is transforming the public sector (New York: Penguin).

Ostrom, V., Tiebout, C. M. & Warren, R. (1961) The organization of government in metropolitan areas: A theoretical inquiry, American Political Science Review, 55(4), pp. 831-842.

Pettersson-Lidbom, P. (2001) An empirical investigation of the strategic use of debt, The Journal of Political Economy, 109(3), pp. 570-583.

Picazo-Tadeo, A. J., González-Gómez, F., Wanden-Berghe, J. G. & Ruiz-Villaverde, A. (2012) Do ideological and political motives really matter in the public choice of local services management? Evidence from urban water services in Spain, Public Choice, 151(1-2), pp. 215-228.

Pollitt, C. & Bouckaert, G. (2000) The nature of public management reform: a comparative analysis (New York: Oxford University Press).

Pollitt, C. & Bouckaert, G. (2011) Public management reform. A comparative analysis: new public management, governance, and the neo-Weberian State (Oxford/New York: Oxford University Press).

Poterba, J. M. (1995) Capital budgets, borrowing rules, and state capital spending, Journal of Public Economics, 56, pp. 165-187.

Reimer, S. (1999) Contract service firms in local authorities: evolving geographies of activity, Regional Studies, 33(2), pp. 121-130.

Walls, M., Macauley, M. & Anderson, S. (2005) Private Markets, Contracts, and Government Provision. What Explains the Organization of Local Waste and Recycling Markets?, Urban Affairs Review, 40 (5), pp. 590–613.

Walsh, K. & Davis, H. (1993) Competition and Service: the Impact of the Local Government Act 1988 (London: HMSO).

Warner, M. & Hebdon, R. (2001) Local government restructuring: privatization and its alternatives, Journal of Policy Analysis and Management, 20(2), pp. 315-336.

Zafra-Gómez, J. L., López-Hernández, A. M., Plata-Díaz, A. M. & Garrido-Rodríguez, J. C. (2015) Financial and Political Factors Motivating the Privatisation of Municipal Water Services, Local Government Studies, 42(2), pp. 1-22.

Zeemering, E. (2008) Governing interlocal cooperation: City council interests and the implications for public management, Public Administration Review, 68(4), pp. 731-741.

Zullo, R. (2009). Does Fiscal Stress Induce Privatization? Correlates of Private and Intermunicipal Contracting, 1992–2002, Governance, 22(3), pp. 459–481.