Abstract
The relative performance of public and private enterprises has been long debated. We construct a comprehensive violation dataset based on the EPA's Safe Drinking Water Information System to empirically investigate the compliance behavior of publicly and privately owned Public Water Systems (PWSs). Our results show that publicly owned PWSs commit significantly more Maximum Contamination Level, Treatment Technique, and Health-Related violations but fewer Monitor and Reporting violations than privately owned PWSs. We also find that municipal-level heterogeneities explain a substantial amount of variation in violation behaviors among PWSs, suggesting water supply quality depends crucially on location-specific regulations and local economic conditions.
Highlights
IntroductionPrivately owned facilities are expected to have an increase in Monitor and Reporting (MR) violations, as these might offer the opportunity to avoid or delay the costs of responding to a Maximum Contamination Level (MCL) violation, and privately owned facilities may be inclined to delay compliance with a Treatment Technique (TT) regulation that imposes a costly new technology
Water utility privatization in the early 1980s raises concern about whether privately owned Public Water Systems (PWSs) can outperform publicly owned utilities (Arnold 2009)
The dependent variables are the number of Maximum Contamination Level (MCL), Monitor and Reporting (MR), and Treatment Technique (TT) violations that occurred in a given year for a PWS in Panels A, B, and C, respectively
Summary
Privately owned facilities are expected to have an increase in Monitor and Reporting (MR) violations, as these might offer the opportunity to avoid or delay the costs of responding to a Maximum Contamination Level (MCL) violation, and privately owned facilities may be inclined to delay compliance with a Treatment Technique (TT) regulation that imposes a costly new technology. We provide strong empirical evidence that publicly owned PWSs commit significantly more Maximum Contamination Level (MCL) and Treatment Technique (TT) violations but fewer Monitor and Reporting (MR) violations than privately owned PWSs. As already mentioned, publicly and privately owned utilities have different objective functions, and the privately owned utilities may choose low-cost compliance actions to avoid high-cost actions, which is consistent with the empirical results where the privately owned PWSs tend to commit more MR violations while avoiding potentially more expensive MCL, TT, and Health-Related violations. This study contributes to a broadly interesting question about whether ownership affects public health or creates political incentives that can be seen to both affect public service outcomes and contribute to the discussion of the potential roles of the public sector, private companies, and communities in the drinking water supply market (Bakker 2014)
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