Does market concentration affect prices in the urban water industry?

Abstract

This paper analyzes the relationship between market concentration in the private segment of the water industry and water prices with a sample of municipalities located in the Southern Spanish region of Andalusia. In doing so, several Heckman sample selection models are estimated with the main finding being that market concentration increases the price of water for residential use charged by private companies. The main policy recommendation is that urban water service privatization must be accompanied by the appropriate regulatory and institutional frameworks to promote competition among businesses and monitor water pricing.