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The Relationships Between Costs and User Charges: The Case of a Norwegian Utility Service

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Author Info

  • Lars-Erik Borge
  • Jørn Rattsø

Abstract

The paper investigates the relationships between costs and user charges in the sewage industry in Norwegian local governments. The purpose of the analysis is to answer the following questions: (i) To what extent is a higher unit cost passed on to consumers in terms of a higher user charge? (ii) Does user charge financing lead to higher or lower unit cost? The econometric analysis indicates that around 40 per cent of a cost increase is passed on to consumers in terms of higher user charge. Moreover, user charge financing has a significant negative effect on the unit cost. An increase in the degree of user charge financing by 10 per cent-points is predicted to reduce the unit cost by 5-8 per cent.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2003/wp-cesifo-2003-09/cesifo1_wp1033.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1033.

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Date of creation: 2003
Date of revision:
Handle: RePEc:ces:ceswps:_1033

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Related research

Keywords: cost control; user charges; sponsor-bureau model; utility service;

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References

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  1. Lars-Erik Borge & Jørn Rattsø, 2003. "Property taxation as incentive for cost control: Empirical evidence for utility services in Norway," ERSA conference papers ersa03p219, European Regional Science Association.
  2. James M. Poterba, 1997. "Demographic structure and the political economy of public education," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 16(1), pages 48-66.
  3. Edward L. Glaeser, 1995. "The Incentive Effects of Property Taxes on Local Governments," NBER Working Papers 4987, National Bureau of Economic Research, Inc.
  4. Moene, Karl O., 1986. "Types of bureaucratic interaction," Journal of Public Economics, Elsevier, vol. 29(3), pages 333-345, April.
  5. Borge, Lars-Erik, 1995. " Economic and Political Determinants of Fee Income in Norwegian Local Governments," Public Choice, Springer, vol. 83(3-4), pages 353-73, June.
  6. Borge, Lars-Erik, 2000. "Charging for public services: the case of utilities in Norwegian local governments," Regional Science and Urban Economics, Elsevier, vol. 30(6), pages 703-718, December.
  7. Hoxby, Caroline M., 1999. "The productivity of schools and other local public goods producers," Journal of Public Economics, Elsevier, vol. 74(1), pages 1-30, October.
  8. Inman, Robert P., 1989. "The local decision to tax : Evidence from large U.S. Cities," Regional Science and Urban Economics, Elsevier, vol. 19(3), pages 455-491, August.
  9. Jorid Kalseth & Jørn Rattsø, 1998. "Political Control of Administrative Spending: The Case of Local Governments in Norway," Economics and Politics, Wiley Blackwell, vol. 10(1), pages 63-83, 03.
  10. Rubinfeld, Daniel L., 1987. "The economics of the local public sector," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 2, chapter 11, pages 571-645 Elsevier.
  11. Borge, Lars-Erik & Rattso, Jorn, 1995. "Demographic shift, relative costs and the allocation of local public consumption in Norway," Regional Science and Urban Economics, Elsevier, vol. 25(6), pages 705-726, December.
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Citations

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Cited by:
  1. Richard M. Bird & Enid Slack, 2004. "Fiscal Aspects of Metropolitan Governance," International Tax Program Papers 0401, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
  2. Lars-Erik Borge & Marianne Haraldsvik, 2009. "Efficiency potential and determinants of efficiency: An analysis of the care of elderly sector in Norway," Working Paper Series 10109, Department of Economics, Norwegian University of Science and Technology.
  3. Borge, Lars-Erik & Rattsø, Jørn, 2008. "Property taxation as incentive for cost control: Empirical evidence for utility services in Norway," European Economic Review, Elsevier, vol. 52(6), pages 1035-1054, August.
  4. Jørn Rattsø & Jon Hernes Fiva, 2005. "Decentralization with Property Taxation to Improve Incentives: Evidence from Local Governments’ Discrete Choice," Working Paper Series 5305, Department of Economics, Norwegian University of Science and Technology, revised 02 Sep 2005.

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