Cost Savings of Contracting Out Refuse Collection

14 Pages Posted: 22 Apr 2005

See all articles by Elbert Dijkgraaf

Elbert Dijkgraaf

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus University Rotterdam, SEOR-ECRi

Raymond Gradus

The Netherlands Ministry of Social Affairs and Employment

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.

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

JEL Classification: D21, H21, H42, L33

Suggested Citation

Dijkgraaf, Elbert and Gradus, Raymond, Cost Savings of Contracting Out Refuse Collection. Available at SSRN: https://ssrn.com/abstract=703967

Elbert Dijkgraaf (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Erasmus University Rotterdam, SEOR-ECRi ( email )

P.O. Box 1738
H 7-34
Rotterdam, 3000 DR
Netherlands
+31 10 4082590 (Phone)
+31 10 4089650 (Fax)

HOME PAGE: http://www.ecri.nl

Raymond Gradus

The Netherlands Ministry of Social Affairs and Employment ( email )

Den Haag
Netherlands

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