Privatization of Public Goods: Evidence from the Sanitation Sector in Senegal

Privatization of a public good (the management of sewage treatment centers in Dakar, Senegal) leads to an increase in the productivity of downstream sewage dumping companies and a decrease in downstream prices of the services they provide to households. We use the universe of legal dumping of sanitation waste from May 2009 to May 2018 to show that legal dumping increased substantially following privatization—on average an increase of 74%, or an increase of about 1640 trips to treatment centers each month. This is due to increased productivity of all trucks, not just those associated with the company managing the privatized treatment centers. Household-level survey data shows that downstream prices of legal sanitary dumping decreased by 5% following privatization, and DHS data shows that diarrhea rates among children under five decreased in Dakar relative to secondary cities in Senegal following privatization with no similar effect on respiratory illness as a placebo.