Is privatization of sanitation services good for health?

This paper investigates the effect of different modes of privatization of water and sewage services in Brazil on epidemiological indicators as an empirical strategy to assess the cost-quality trade-off claimed by received theory. Results indicate that the local private mode of organization decreases morbidity rates and that the hybrid mode of organization, where a private operator shares decision rights with the state government, does not deteriorate the quality of the services. Overall, results indicate that the privatization of sanitation services is not necessarily subject to the cost-quality trade-off, even if quality indicators are non-contractible.