Transformation of governance in the water sector: How to measure legitimate, efficient and effective performance?

In the context of liberalization in the public utility sectors, performance criteria have mainly focused on efficiency and effectiveness. However, the realization that restructuring based on the latter criteria has not been consistently successful in the water sector calls for a need to establish additional standards to measure performance of water governance. With increasing involvement of private actors in the provision of water services, which may bypass democratic institutions, legitimacy is becoming a central concern in water governance. We thus propose to add legitimacy to efficiency and effectiveness and to use these as three overarching criteria for measuring the performance of governance in a public utility sector like water. To make these criteria empirically measureable, this paper elaborates their analytic foundations via two theories of new institutionalism: governance theory and new institutional economics. By deriving input from such political and economic theories, we aim to create a comprehensive analytical framework through which the performance of water governance can be evaluated in terms of legitimacy, efficiency and effectiveness. While this paper does not include an empirical analysis, we nevertheless refer to empirical examples of the transformation of water governance in the Western European context in order to make our argumentation empirically plausible.