January 2021 In: Applied Economics — Alexandre Mayol et Stéphane Saussier
In this paper, we studied the influence of contract renewals on water prices in France. When studying French water contracts in force between 2008 and 2018, we found that contract renewals have little influence on the prices paid by consumers. However, at contract renewal times, the share of the price that goes to the firms decreases. This price decrease is compensated by an increase in the share of the price that is retained by the municipalities. We interpret this result as a willingness by municipalities to retake control of water services. In addition, we show that the higher the municipalities’ shares are, the higher the probability of switching to direct public management at contract renewal times. This suggests that local authorities increasing their responsibilities in providing water services (i.e., increasing their price shares) may switch later to direct public management more easily.