Oversized solutions to big problems: The political economy of partnerships and environmental cleanup in India

Abstract

Managing polluted industrial waste from small firms in poor communities is a challenge in many developing countries. In recent years, partnerships among national governments, private sector actors, investors, and foreign aid donors have become popular solutions to address the problem. We argue, however, some partnerships may exhibit a boom and bust pattern that potentially leaves communities worse off in the long run. We test this argument by analyzing variations in the effectiveness of Common Effluent Treatment Plants (CETPs) built in India. We first examine the boom-bust cycle in a public-private partnership CETP in the city of Kanpur. We then extend the analysis to all 88 CETPs in India between 1986 and 2004. We use difference-in-difference techniques to evaluate the effectiveness of CETPs that are fully public, fully private, and those that augmented capacity via partnerships among governments, private sector actors and foreign donors. Our findings suggest that these public-private partnerships tend to follow distinct patterns of success and failure over time.