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Competition or Monopoly? Comparing Privatization of Local Public Services in the U.S. and Spain

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Differences in national traditions of public intervention, institutional arrangements and public service markets make local public services an area of great diversity. In this paper we undertake a comparative study of how local governments arrange for delivery of water and waste services in the US and Spain. We find levels of privatization are higher in Spain than in the US. We review organizational reform in the two contexts and compare service delivery data using national surveys from each country. We find lower and less stable privatization in the US stems in part from adherence to public choice emphasis on the benefits of market competition over public monopoly. By contrast, Spanish municipalities reflect an industrial organization approach, and create hybrid public/private firms which benefit from both market engagement and economies of scale available under monopoly production. We conclude that managing monopoly may be more important than competition in local service delivery.