This paper studies various aspects of the increasing role of private investment in the water services and sanitation (WSS) sector in developing countries. We start by surveying the different types of private sector participation (PSP) in the WSS sector, and the share of public and private responsibilities under each scheme. We then proceed by empirically testing the impact of PSP in the provision of water and sanitation on the average individuals’ welfare with regard to water and sanitation. This paper shows that the private sector has the potential to generate a number of social and environmental benefits for a number of reasons, including its potential to increase efficiency within the sector and increase much-needed levels of investment. Poorer households gain access to affordable services from which they have long been excluded. Furthermore, adverse public health effects of inadequate service provision may be mitigated, and wastewater collection and treatment levels may be increased. The paper also illustrates actual case studies involving PSP in developing countries to present some of the actual improvements that the private sector has already generated, particularly the increased access to water and sanitation, and the rise in water use as suggested by our empirical part.
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