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Cost savings of contracting out refuse collection

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  • Elbert Dijkgraaf

    (Erasmus University Rotterdam)

  • Raymond Gradus

    (Erasmus University Rotterdam & Min. of Social Affairs)

Abstract

The article discusses the possible cost savings of contracting out refuse collection in the Netherlands. According to foreign econometric studies, contracting out refuse collection leads to cost savings of approximately 20%. Our findings indicate that similar cost savings apply to the Netherlands. However, different production technologies apply to internal or external refuse collection. The Chow test, which examines whether the estimated coefficients on the explanatory variables are the same, reveals that different cost functions have to be estimated for the sub-samples. We show that the postulated cost savings can even be larger, when taking account of effects of different production technologies. Though significant cost savings exist on contracting out waste collection, households will not experience these cost savings on a one to one basis. Private refuse collection firms must pay VAT while public firms are exempted. At present the Dutch fiscal system hinders a more pronounced role for private refuse collection firms.

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File URL: http://128.118.178.162/eps/pe/papers/0409/0409002.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Public Economics with number 0409002.

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Length: 19 pages
Date of creation: 01 Sep 2004
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Handle: RePEc:wpa:wuwppe:0409002

Note: Type of Document - pdf; pages: 19
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Web page: http://128.118.178.162

Related research

Keywords: Refuse collection; cost estimation; Chow stability test; pooling; VAT;

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  1. Schmidt, Peter & Sickles, Robin, 1977. "Some Further Evidence on the Use of the Chow Test under Heteroskedasticity," Econometrica, Econometric Society, vol. 45(5), pages 1293-98, July.
  2. Nikos Apergis & John Papanastasiou & Kostas Velentzas, 1997. "The credibility of policy announcements: Greek evidence," Applied Economics, Taylor & Francis Journals, vol. 29(6), pages 699-705.
  3. Ohlsson, Henry, 1998. "Ownership and Production Costs - Choosing Between Public Production and Contracting Out," Working Paper Series 1998:6, Uppsala University, Department of Economics.
  4. Eoin Reeves & Michael Barrow, 2000. "The Impact of Contracting Out on the Costs of Refuse Collection Services - The Case of Ireland," The Economic and Social Review, Economic and Social Studies, vol. 31(2), pages 129-150.
  5. Thursby, Jerry G., 1992. "A comparison of several exact and approximate tests for structural shift under heteroscedasticity," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 363-386.
  6. 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.
  7. Fisher, Franklin M, 1970. "Tests of Equality Between Sets of Coefficients in Two Linear Regressions: An Expository Note," Econometrica, Econometric Society, vol. 38(2), pages 361-66, March.
  8. Domberger, S & Meadowcroft, S & Thompson, D, 1988. "Competition and efficiency in refuse collection : a reply," Fiscal Studies, Institute for Fiscal Studies, vol. 9(1), pages 86-90, February.
  9. Toyoda, Toshihisa, 1974. "Use of the Chow Test under Heteroscedasticity," Econometrica, Econometric Society, vol. 42(3), pages 601-08, May.
  10. Domberger, Simon & Jensen, Paul, 1997. "Contracting Out by the Public Sector: Theory, Evidence, Prospects," Oxford Review of Economic Policy, Oxford University Press, vol. 13(4), pages 67-78, Winter.
  11. John Cubbin & Simon Domberger & Shirley Meadowcroft, 1987. "Competitive tendering and refuse collection: identifying the sources of efficiency gains," Fiscal Studies, Institute for Fiscal Studies, vol. 8(3), pages 49-58, August.
  12. Cheng-Chung Lai, 1994. "Market Structure and Inter-industry Profit Differences in Taiwan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 33(2), pages 147-163.
  13. 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.
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