Has privatisation influenced public service equity? Evidence from China

HuanmingWang_etalHuanming Wang, Rui Mu and Shuyan Liu

Since the late 1970s, governments in many countries have adopted privatisation reforms, including contracting-out public services, transferring functions and responsibilities to the private sectors, and selling enterprises to private interests. The practice of privatisation in some developing countries has led to the problem of unequal treatment. For instance, many local governments in China outsourced their public services (e.g. public bus services, water supply and waste disposal services) to private companies. This included the delegation of operations entirely to these private entities. Government subsidies were allocated to the private operators, but these subsidies could not cover the full costs incurred by those private operators.. In this context, the private operators had to concentrate their services in densely populated areas and neglect the needs of more sparsely populated areas, resulting in the inadequate provision of services in the latter areas. As a result of this, some local governments withdrew from these privatised arrangements in order to ensure a more equal provision of services.

Our recent Policy & Politics article explores whether and to what extent privatisation and its reversal influence public service equity in China. Our paper focuses on public bus services in China, the provision of which has been subject to both privatisation and subsequent re-nationalisation, and draws upon an extensive programme of research that covered 245 cities. The Coefficient of Variation (CV) method was used to measure equity, and the multiple-regression method was adopted to test the relationship between privatisation and equity.

Our findings confirmed that public bus service equity is affected by privatisation in a non-linear way. However, the impact of privatisation depends on the way in which privatisation is defined. The results show that there is a negative relationship between market access and equity, an inverted u-shaped relationship between competition and equity, and a positive relationship between ownership and equity. In addition, the findings demonstrate that re-nationalisation does not simply restore public service equity. The findings contribute to theory by indicating that the relationship between privatisation and equity is not a clear causal or non-causal relationship, but is more complex when looked at from different perspectives. In practical terms, the findings may provide policy implications for privatizing public servicesfor China and other developing countries.

You may read the original research in Policy & Politics:

Huanming Wang, Rui Mu, Shuyan Liu, The effects of privatization on the equity of public services: evidence from ChinaPolicy & Politics, DOI: 10.1332/030557317X14938075758967

If you enjoyed this blog post, you may also be interested to read:

Exploring regionalism in public management reforms: the case of the Italian hospital sector

Electricity market reform: so what’s new?

Participatory policy making under authoritarianism: the pathways of local budgetary reform in the People’s Republic of China


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