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Privatization and competition in the delivery of local services: An empirical examination of the dual market hypothesis

Author

Listed:
  • Germà Bel

    () (PPRE-IREA, Universitat de Barcelona (SPAIN).)

  • Xavier Fageda

    () (PPRE-IREA, Universitat de Barcelona (SPAIN).)

Abstract

This paper empirically analyses the hypothesis of the existence of a dual market for contracts in local services. Large firms that operate on a national basis control the contracts for delivery in the most populated and/or urban municipalities, whereas small firms that operate at a local level have the contracts in the least populated and/or rural municipalities. The dual market implies the high concentration and dominance of major firms in large municipalities, and local monopolies in the smaller ones. This market structure is harmful to competition for the market as the effective number of competitors is low across all municipalities. Thus, it damages the likelihood of obtaining cost savings from privatization.

Suggested Citation

  • Germà Bel & Xavier Fageda, 2008. "Privatization and competition in the delivery of local services: An empirical examination of the dual market hypothesis," Working Papers XREAP2008-04, Xarxa de Referència en Economia Aplicada (XREAP), revised Apr 2008.
  • Handle: RePEc:xrp:wpaper:xreap2008-04
    as

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    File URL: http://www.xreap.cat/RePEc/xrp/pdf/XREAP2008-4.pdf
    File Function: Revised version, 2008
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    References listed on IDEAS

    as
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    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. 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.
    4. Mildred Warner & Amir Hefetz, 2003. "Rural - urban differences in privatization: limits to the competitive state," Environment and Planning C: Government and Policy, Pion Ltd, London, vol. 21(5), pages 703-718, October.
    5. John Vickers & George Yarrow, 1991. "Economic Perspectives on Privatization," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 111-132, Spring.
    6. E. Dijkgraaf & R. H. J. M. Gradus, 2007. "Fair competition in the refuse collection market?," Applied Economics Letters, Taylor & Francis Journals, vol. 14(10), pages 701-704.
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    10. 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.
    11. Ferris, James M & Graddy, Elizabeth, 1994. "Organizational Choices for Public Service Supply," Journal of Law, Economics, and Organization, Oxford University Press, vol. 10(1), pages 126-141, April.
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    13. 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.
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    17. E. Dijkgraaf & R. H. J. M. Gradus, 2005. "Collusion in the Dutch waste collection market," Industrial Organization 0502006, EconWPA.
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    Cited by:

    1. José Luis Navarro-Espigares & José Aureliano Martín-Segura, 2010. "Public--private partnership and regional productivity in the UK," The Service Industries Journal, Taylor & Francis Journals, vol. 31(4), pages 559-580, May.

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    Keywords

    Competition; Concentration; Local Services; Privatization.;

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