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The theoretical and empirical literature on water supply and sewerage liberalization is reviewed in this paper in order to discuss the potential for market creation and private sector involvement in this sector. The analysis is framed in the “policy roadmap” developed by regulatory economics and discusses opportunities for competition in the market, unbundling, competition for the market and yardstick competition. A review of studies comparing privately and publicly managed water utilities is finally provided.

Liberalization and Private Sector Involvement in the Water Industry: A Review of the Economic Literature