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Efficiency Effects of Privatising Refuse Collection: Be careful and Alternatives present

Author

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  • E. Dijkgraaf

    (Rotterdam School of Economics, Erasmus University Rotterdam)

  • R. Gradus

    (VU University Amsterdam)

Abstract

For refuse collection, we estimate the cost effects of different institutional modes using panel data for almost all Dutch municipalities between 1998 and 2010. The modes we consider are private contracts, intermunicipal cooperation, public provision and own collection. For private companies, the cost advantage is substantially smaller and non-significant if municipal fixed effects are included. The cost advantage of intermunicipal cooperation is larger in this case than that of privatisation. Moreover, if yearly mode dummies and mode duration are also included, we show that for 2004, 2005 and 2006 a large cost increase is visible for privatisation. Which mode offers the most cost-saving opportunity depends strongly on the year and the mode duration. For private contracts, the duration effects lead to lower costs; for municipal cooperation and public provision, there are extra costs to begin with, which disappear after 5 or 6 years.

Suggested Citation

  • E. Dijkgraaf & R. Gradus, 2011. "Efficiency Effects of Privatising Refuse Collection: Be careful and Alternatives present," Tinbergen Institute Discussion Papers 11-156/3, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20110156
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    References listed on IDEAS

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    1. Germà Bel & Elbert Dijkgraaf & Xavier Fageda & Raymond Gradus, 2008. "Similar problems, different solutions: Comparing refuse collection in the Netherlands and Spain," IREA Working Papers 200815, University of Barcelona, Research Institute of Applied Economics, revised Nov 2008.
    2. Stefan Szymanski, 1993. "Cheap rubbish? Competitive tendering and contracting out in refuse collection, 1981-88," Fiscal Studies, Institute for Fiscal Studies, vol. 14(3), pages 109-130, August.
    3. Mattheus Wassenaar & Tom Groot & Raymond Gradus, 2010. "Contracting out, an Empirical Study on Motives," Tinbergen Institute Discussion Papers 10-121/3, Tinbergen Institute.
    4. Elbert Dijkgraaf & Raymond H J M Gradus, 2008. "Institutional Developments in the Dutch Waste-Collection Market," Environment and Planning C, , vol. 26(1), pages 110-126, February.
    5. Stevens, Barbara J, 1978. "Scale, Market Structure, and the Cost of Refuse Collection," The Review of Economics and Statistics, MIT Press, vol. 60(3), pages 438-448, August.
    6. Bel Germà & Fageda Xavier & E. Mildred, 2014. "Is private production of public services cheaper than public production? A meta-regression analysis of solid waste and water services," Public administration issues, Higher School of Economics, issue 3, pages 103-140.
    7. E. Dijkgraaf & R. Gradus, 2003. "Cost Savings of Contracting Out Refuse Collection," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 30(2), pages 149-161, June.
    8. Germa Bel & Anton Costas, 2006. "Do Public Sector Reforms Get Rusty? Local Privatization in Spain," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 9(1), pages 1-24.
    9. E. Dijkgraaf & R. H. J. M. Gradus, 2005. "Collusion in the Dutch waste collection market," Industrial Organization 0502006, University Library of Munich, Germany.
    10. Bernardino Benito & Francisco Bastida & Jose Garcia, 2010. "Explaining differences in efficiency: an application to Spanish municipalities," Applied Economics, Taylor & Francis Journals, vol. 42(4), pages 515-528.
    11. Domberger, S & Meadowcroft, S & Thompson, D J, 1986. "Competitive tendering and efficiency: the case of refuse collection," Fiscal Studies, Institute for Fiscal Studies, vol. 7(4), pages 69-87, November.
    12. Domberger, Simon & Jensen, Paul, 1997. "Contracting Out by the Public Sector: Theory, Evidence, Prospects," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 13(4), pages 67-78, Winter.
    13. Stefan Szymanski, 1996. "The impact of compulsory competitive tendering on refuse collection services," Fiscal Studies, Institute for Fiscal Studies, vol. 17(3), pages 1-19, August.
    14. Maarten A. Allers & Corine Hoeben, 2010. "Effects of Unit-Based Garbage Pricing: A Differences-in-Differences Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 45(3), pages 405-428, March.
    15. Trevor L. Brown & Matthew Potoski, 2003. "Managing contract performance: A transaction costs approach," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 22(2), pages 275-297.
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    Cited by:

    1. E. Dijkgraaf & R. H. J. M. Gradus, 2013. "Cost advantage cooperations larger than private waste collectors," Applied Economics Letters, Taylor & Francis Journals, vol. 20(7), pages 702-705, May.

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    More about this item

    Keywords

    Waste collection; private firms; contracting out; fixed effects;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies

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