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Several studies have compared the efficiency of publicly and privately owned water utilities and reached conflicting conclusions on the impact of ownership on efficiency. This article provides further evidence by estimating a stochastic cost frontier for a sample of Asian and Pacific regional water companies. The results show that efficiency is not significantly different in private companies than in public ones.Policymakers in developing countries, eager to resolve the decade-long debate on the gains from privatization of water utilities, are increasingly interested in assessments of the efficiency of public and private water utilities. Most early studies focused on the performance of public and private providers in the United States. Crain and Zardkoohi (1978), estimating a cost function derived from a generalised Cobb-Douglas production function with a dummy variable for ownership, found that publicly owned water utilities in the United States had higher costs than their privately owned counterparts. Feigenbaum and Teeples (1984) used a translog approximation and concluded that they could not reject the hypothesis (at the 5 percent significance level) that the parameters were identical for government and private operation. Byrnes, Grosskopf, and Hayes (1986) measured efficiency directly in terms of a production function and found no evidence that publicly owned utilities are more wasteful or operated with more slack than privately owned utilities. Fox and Hofler (1986) estimated the extent and cost of technical and allocative inefficiency and found no statistical difference in inefficiency for public and private firms, although they did find allocative differences. Overall, these studies leave the impression that there is no convincing evidence of a systematic superiority of one form of ownership over another.

The efficient operation and expansion of infrastructures in developing countries is crucial for growth and poverty reduction. However, recent reforms aimed at improving the performance of these sectors have had limited success. Evidence suggests that, in many instances, this was because the traditional regulatory theory relied on by policymakers was not suitable for the institutional context in developing countries. This article surveys more recent theoretical work focusing on problems with regulation in these countries. At the heart of the survey is the work of Jean-Jacques Laffont, who, in the last decade of his life, set about developing a theoretical framework for regulation in developing countries. We consider the implications of his work, which focused on the key institutional limitations faced in developing countries. We then discuss where experience suggests that there are important omissions from this modeling, bringing in extensions and alternative approaches pursued by other authors. We conclude by summarizing the key ways in which regulatory policy will be different when institutions are weak. Overall, we find that an understanding of the institutional context and its implications are crucial when designing a regulatory framework for developing countries.

A computable general equilibrium (CQE) model is used to estimate the macroeconomic and distributional effects of the privatization and regulation of utilities in Argentina, begun in 1989. Based on data available after the privatization that indicate different kinds of efficiency gains in electricity, gas, water, and telecommunications, both the privatization and effective regulation are estimated to yield significant macroeconomic benefits. Gains from the privatization accrue mainly to high-income classes, while gains from the effective regulation of newly privatized utilities accrue mainly to lowincome classes. CGE estimates of overall employment effects suggest that privatization was not a major contributor to the dramatic rise in unemployment in Argentina between 1993 and 1995. This rise was more likely due to the "Tequila Effect" of an interest rate shock. Omar Chisari and Carlos Romero are affiliated with the Universidad Argentina de la Empresa in Buenos Aires, and Antonio Estache is with the World Bank Institute (formerly the Economic Development Institute). The authors thank Daniel Benitez for extremely competent research assistance and Shanta Devarajan,

Estacihe an1dKouassi analyze thc deteriilnanits of the utilities' performanices, the preclomi nancc of constant efficiency levels reached bv 21 African vwater utilities.returins to scale, and the great rate of technological They assess efficiency throLighi the estimationl of a progress. And the authors show that the institutionial production frontier for the sector in Africa. T1-he capacity of the countrv, as well as its governanice quality, efficiency estimates confirm mucIh of the Commllonl are significant driving factors in the performance of each perceptions from partial productivity indicators. They firm.point to a great heterogeneity in the African water Tshis paper-a product of the Governanice, Regulation, and Finance Division, World Banik Institute-is part of a larger effort in the institute to promote the uliderstanidinig of regulatory issues. Copies of the paper are availahle free fromii the World