Does Cooperation Reduce Service Delivery Costs? Evidence from Residential Solid Waste Services

Germà Bel, Xavier Fageda, Melania Mur
2012 Journal of public administration research and theory  
The main objective of this work is to examine whether small municipalities can reduce costs through cooperation and delegation. We first examine factors explaining the decision of municipalities to cooperate and delegate service delivery responsibility, in this case residential solid waste services, to another government. Furthermore, we estimate the impact of cooperation on the costs of providing residential solid waste services. The empirical analysis is done using a sample of small Spanish
more » ... nicipalities. Results of the empirical analysis suggest that cooperation is a pragmatic choice for municipalities with a suboptimal size: municipalities that cooperate by delegating face lower costs for residential solid waste services than those that do not. Furthermore, we find that cooperation allows municipalities to save costs once we control for the form of production and other factors explaining costs. IntRoDuCtIon Municipalities do not often coincide with the optimal scale for the delivery of services, and this mismatch can constrain decisions regarding how these services are to be provided. One means of reorganizing services in order to obtain returns to scale 1 (economies of scale, hereafter) is via the consolidation of governments, therefore, by merging local jurisdictions. Such a process involves the merging of multiple jurisdictions, so that services are provided in an aggregate and joint form. However, this formula has met with little success in general, although it has been adopted in countries such as Holland (Bel, Dijkgraaf, Fageda, and Gradus 2010) and Switzerland (Steiner 2003). We are grateful to comments received when this article was presented at the First Barcelona Workshop on Public-Private Partnerships (Barcelona) and the XIX Encuentro de Economía Pública (Santiago de Compostela). Comments and suggestions received from Trevor Brown have been extremely useful. We have benefited as well from comments and suggestions by three anonymous referees. Address correspondence to the author at gbel@ub.edu. 1 Returns to scale is the generic denomination that includes economies of scale, economies of density, and economies of scope (see Bel, forthcoming). These are different origins of costs savings that can eventually be obtained by means of reform of service delivery, and are associated with different characteristics of the service cost structure. From here on, we use only "economies of scale" to avoid terminological confusion.
doi:10.1093/jopart/mus059 fatcat:olo66nt5abg2bp6bnbgaqfbqgi