Does competition affect the price of water services?Evidence from Spain

Laburpena

In recent decades, developed countries have privatized certain municipal services, but the presence of private enterprises in the provision of water services still remains scarce. One of the arguments against privatizing water services is that, due to the virtual absence of competition, privatization raises water prices. Is there really a relationship between the degree of competition in the industry and the price of water? This article aims to answer this question using data from 162 municipalities in Southern Spain. Our main contribution is analyzing whether market concentration, as a proxy for lack of competition, affects the price of water for residential uses. Empirical evidence shows that competition reduces water prices. The main policy recommendation is that urban water service privatization must be accompanied by appropriate regulatory and institutional frameworks to promote competition among businesses and monitor water pricing.