Subsidies in Chilean Public Utilities
The author analyzes subsidies in Chile's public utilities. Over the last decade, especially, significant efforts have been made to extend public services to rural populations. An explicit consumption subsidy for potable water (targeted to the poorest twenty percent of the population) currently...
| Main Author: | |
|---|---|
| Format: | Publications & Research |
| Language: | en_US |
| Published: |
World Bank, Washington, DC
2015
|
| Subjects: | |
| Online Access: | http://hdl.handle.net/10986/21335 |
| id |
okr-10986-21335 |
|---|---|
| recordtype |
oai_dc |
| spelling |
okr-10986-213352021-04-23T14:04:01Z Subsidies in Chilean Public Utilities Serra, Pablo administrative costs bad debts cash transfers central government citizen participation concession areas consumer surplus consumption charge cost of water cross subsidies cross-subsidies current prices debt drinking water economics electricity electricity services energy consumption expenditures government spending households housing income legislation local authorities maintenance costs marginal cost medical care municipalities national budget operating costs policy research positive externalities potable water present value price elasticity of demand private sector privatization production costs profitability public health public health services public services public utilities public water public works regulatory framework residential consumers return on equity rural communities rural drinking water sanitation services scale economies service provider sewerage services social costs social expenditure social welfare surcharges technical assistance telecommunications transaction costs treasury urban areas water companies water company water consumption water coverage water meter water rates water services water systems willingness to pay subsidies public utility finance rural population consumption patterns potable water cross-subsidies competitiveness price decontrols regulatory framework rural infrastructure marginal costs The author analyzes subsidies in Chile's public utilities. Over the last decade, especially, significant efforts have been made to extend public services to rural populations. An explicit consumption subsidy for potable water (targeted to the poorest twenty percent of the population) currently benefits seventeen percent of the population. Cross-subsidies have been virtually eliminated in Chile, and existing subsidies are funded from the national budget. The elimination of cross-subsidies has facilitated competition in some services. Prices have fallen substantially in services that new operators have entered, showing that regulation is a poor substitute for competition. The Chilean experience shows that it is possible to design direct subsidies (such as the one for drinking water) at relatively low cost to the state. Moreover, putting rural infrastructure projects out to public tender whenever possible, has allowed substantial reductions in government spending. Chile's experience also shows that it is possible to use subsidies that do not distort people's behavior - by making sure that they perceive the marginal cost of providing the service. In rural zones where there is no infrastructure, investment needs to be subsidized. Users do not pay the long-run marginal cost, but it is important that the rate charged, at least cover the short-term marginal cost. In other words, rural utility charges are required to cover the system's operating costs. For those who argue that the poor would be better off with cash transfers (choosing their own consumption baskets), the author outlines the arguments for subsidizing utilities, beyond the moral value of giving the poor access to public services, considered basic for existence. 2015-01-22T21:10:09Z 2015-01-22T21:10:09Z 2000-09 http://hdl.handle.net/10986/21335 en_US Policy Research Working Paper;No. 2445 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Latin America & Caribbean Chile |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
en_US |
| topic |
administrative costs bad debts cash transfers central government citizen participation concession areas consumer surplus consumption charge cost of water cross subsidies cross-subsidies current prices debt drinking water economics electricity electricity services energy consumption expenditures government spending households housing income legislation local authorities maintenance costs marginal cost medical care municipalities national budget operating costs policy research positive externalities potable water present value price elasticity of demand private sector privatization production costs profitability public health public health services public services public utilities public water public works regulatory framework residential consumers return on equity rural communities rural drinking water sanitation services scale economies service provider sewerage services social costs social expenditure social welfare surcharges technical assistance telecommunications transaction costs treasury urban areas water companies water company water consumption water coverage water meter water rates water services water systems willingness to pay subsidies public utility finance rural population consumption patterns potable water cross-subsidies competitiveness price decontrols regulatory framework rural infrastructure marginal costs |
| spellingShingle |
administrative costs bad debts cash transfers central government citizen participation concession areas consumer surplus consumption charge cost of water cross subsidies cross-subsidies current prices debt drinking water economics electricity electricity services energy consumption expenditures government spending households housing income legislation local authorities maintenance costs marginal cost medical care municipalities national budget operating costs policy research positive externalities potable water present value price elasticity of demand private sector privatization production costs profitability public health public health services public services public utilities public water public works regulatory framework residential consumers return on equity rural communities rural drinking water sanitation services scale economies service provider sewerage services social costs social expenditure social welfare surcharges technical assistance telecommunications transaction costs treasury urban areas water companies water company water consumption water coverage water meter water rates water services water systems willingness to pay subsidies public utility finance rural population consumption patterns potable water cross-subsidies competitiveness price decontrols regulatory framework rural infrastructure marginal costs Serra, Pablo Subsidies in Chilean Public Utilities |
| geographic_facet |
Latin America & Caribbean Chile |
| relation |
Policy Research Working Paper;No. 2445 |
| description |
The author analyzes subsidies in Chile's public utilities. Over the last decade, especially, significant efforts have been made to extend public services to rural populations. An explicit consumption subsidy for potable water (targeted to the poorest twenty percent of the population) currently benefits seventeen percent of the population. Cross-subsidies have been virtually eliminated in Chile, and existing subsidies are funded from the national budget. The elimination of cross-subsidies has facilitated competition in some services. Prices have fallen substantially in services that new operators have entered, showing that regulation is a poor substitute for competition. The Chilean experience shows that it is possible to design direct subsidies (such as the one for drinking water) at relatively low cost to the state. Moreover, putting rural infrastructure projects out to public tender whenever possible, has allowed substantial reductions in government spending. Chile's experience also shows that it is possible to use subsidies that do not distort people's behavior - by making sure that they perceive the marginal cost of providing the service. In rural zones where there is no infrastructure, investment needs to be subsidized. Users do not pay the long-run marginal cost, but it is important that the rate charged, at least cover the short-term marginal cost. In other words, rural utility charges are required to cover the system's operating costs. For those who argue that the poor would be better off with cash transfers (choosing their own consumption baskets), the author outlines the arguments for subsidizing utilities, beyond the moral value of giving the poor access to public services, considered basic for existence. |
| format |
Publications & Research |
| author |
Serra, Pablo |
| author_facet |
Serra, Pablo |
| author_sort |
Serra, Pablo |
| title |
Subsidies in Chilean Public Utilities |
| title_short |
Subsidies in Chilean Public Utilities |
| title_full |
Subsidies in Chilean Public Utilities |
| title_fullStr |
Subsidies in Chilean Public Utilities |
| title_full_unstemmed |
Subsidies in Chilean Public Utilities |
| title_sort |
subsidies in chilean public utilities |
| publisher |
World Bank, Washington, DC |
| publishDate |
2015 |
| url |
http://hdl.handle.net/10986/21335 |
| _version_ |
1764447970920497152 |