Is Private Production of Public Services Cheaper Than Public Production? A Meta-Regression Analysis of Solid Waste and Water Services'

Journal of Policy Analysis and Management (Impact Factor: 0.93). 06/2010; 29(3):553-577. DOI: 10.2307/40802088
Source: RePEc


Privatization of local government services is assumed to deliver cost savings, but empirical evidence for this from around the world is mixed. We conduct a meta-regression analysis of all econometric studies examining privatization of water distribution and solid waste collection services and find no systematic support for lower costs with private production. Differences in study results are explained by differences in time period of the analyses, service characteristics, and policy environment. We do not find a genuine empirical effect of cost savings resulting from private production. The results suggest that to ensure cost savings, more attention be given to the cost characteristics of the service, the transaction costs involved, and the policy environment stimulating competition, rather than to the debate over public versus private delivery of these services. © 2010 by the Association for Public Policy Analysis and Management.

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    • "The literature around private road pricing is negligible relative to those of congestion pricing although the practice of private pricing is no less prevalent than that of congestion pricing, especially in the US. Theoretical modelling of private road pricing has analysed the effects of duopoly and monopoly structures (Zhang, 2008; Winston and Yan, 2011; Rouhani et al., 2013), the effects of traffic diversion to secondary roads (Swan and Belzer, 2010), the interrelationships between pricing, capacity, and financing/investment (Verhoef and Rouwendal, 2004; Zhang, 2008), and impacts of alternative privatization structures and regulations (Yang and Meng, 2000; Tan et al. 2010; Zhang and Yusufzyanova, 2012). The profit maximization model can be extended by considering more than one profitmaximizing firm. "
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    • "However, this is not in line with the empirical analysis for Norway (see Sørensen (2007)), that gives indications that municipal cooperations suffer from transaction and agency costs as several political authorities are involved. Although Dutch municipal cooperation is in general a multigovernment body, for refuse collection it seems to come with few transaction costs as on a-day-to-day basis, civil servants run this public unit (see Bel et al. (2010)). For public firms, no significant effect is found. "
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    Applied Economics Letters 05/2013; 20(7). DOI:10.1080/13504851.2012.732682 · 0.23 Impact Factor
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