The Costs of Disposal and Recycling. An Application to Italian Municipal Solid Waste Services

Transcription

1 The Costs of Dsposal and Recyclng. An Applcaton to Italan Muncpal Sold Waste Sevces Gazano Abate Fabzo Ebetta Govann Faquell Davde Vannon No. 3 Decembe by Gazano Abate, Fabzo Ebetta, Govann Faquell and Davde Vannon. Any opnons expessed hee ae those of the authos and not those of the Collego Calo Albeto.

2 The Costs of Dsposal and Recyclng An Applcaton to Italan Muncpal Sold Waste Sevces Novembe 011 Gazano Abate (Unvesty of Easten Pedmont and HERMES) Fabzo Ebetta (Unvesty of Easten Pedmont and HERMES) Govann Faquell (Unvesty of Easten Pedmont and Ces-CNR) Davde Vannon 1 (Unvesty of Tono and Collego Calo Albeto) Abstact The pape nvestgates the costs of waste dsposal and ecyclng sevces by usng a well-behaved Composte cost functon model. Ou estmates on a unque sample of moe than 500 Italan muncpaltes hghlght that the efuse collecton technology exhbts constant etuns to scale as well as scope economes between dsposal and ecyclng. As fa as the sze of the muncpalty nceases, scope economes se up to 14%, but they ae accompaned wth oveall dseconomes of scale. Ou fndngs suggest that, on the one hand, jont management of dsposal and ecyclng should be encouaged, and, on the othe hand, that stateges amed at nceasng the shae of waste sent fo ecyclng would not mply a consdeable ncease n total costs. Keywods: Sold waste, ecyclng, cost functons. JEL codes: D4, H4, L33, L99 1 Coespondng Autho: Unvesty of Tono, Depatment of Economcs and Publc Fnance G. Pato, Coso Unone Sovetca 18 bs, 1014 Tono Italy. Tel: E-mal: vannon@econ.unto.t. 1

3 1. Intoducton In local publc sevces such as enegy, wate, publc tanspot, the attenton of polcymakes has been devoted, on the one hand, on envonmental egulaton, and, on the othe hand, on the pomoton of competton and cost effcency. As to the second ssue, the polces that have been poposed ae a mxtue of mandatoy dvesttues, unbundlng and compettve tendeng, but owneshp and copoate govenance changes (angng fom pvatzaton o the pomoton of pvate publc patneshps to foms of ntemuncpal allances) have been suggested as well. Muncpal Sold Waste (MSW) sevces, smlaly to othe netwok ndustes, have undegone adcal changes n both oganzatonal and maket stuctue. On the bass of EU dectves 006/1 and 008/98, waste management legslaton and polcy should be nsped by a pncple of heachy: peventon, pepang fo euse, ecyclng, ecovey and dsposal. Ths mples an nceasng ole of sepaated collecton, wth a taget of 50% of MSW by 00. In Italy, the legslaton has foeseen even moe ambtous tagets (the shae of waste sent fo ecyclng was 15% fo 1999, 5% wthn 001, and up to 60% n 011). The efoms ntoduced by the Ronch s decee (law /1997) and by the Envonmental Code (law 15/006) amed at favoung the ntegated management of a too much fagmented poducton pocess, as well as at pomotng compettve tendeng pocedues fo the management of waste collecton. Moeove, they ntoduced a new taff system that, ceatng a dect connecton between the sold waste geneated by households and the amount to be pad fo efuse collecton, should nduce ctzens to adopt a moe esponsble envonmental behavou. As ponted out by Callan and Thomas (001), the empcal lteatue has devoted much moe attenton to demand-sde aspects (.e., how to dscouage land dsposal, how to encouage ecyclng and ecovey, how to desgn and mplement an optmal pcng pogam, and so on) than to supply-sde ssues such as the cost analyss of the MSW maket. The evdence on the costs of waste collecton and ecyclng s even moe scant, as ponted out by Bohm et al. (010): The gowth n cubsde ecyclng has pesumably evolved ndependently of costs and, pehaps fo ths eason, the economcs lteatue s lagely slent (wth a few mpotant exceptons) on undestandng the costs of muncpal waste and ecyclng sevces. Data lmtatons may have also hampeed nvestgatons nto costs (Bohm et al., 010, p. 864). Snce the collecton of ecyclng waste has now eached a qute establshed shae (though, at least fo the case of Italy, not fully consstent acoss the whole natonal tetoy), and ndeed s a Fo example, see Knnaman (005 and 006). In patcula, Knnaman (005) tes to undestand why muncpaltes ae opeatng cost ecyclng pogams desgned to educe the extenal costs of gabage dsposal. The esults ponted towads the pesence of altustc tastes fo ecyclng on the pat of households, so that polces amed at settng specfc ecyclng goals mght be expensve but not effectve at eachng the equed taget.

4 stongly encouaged pactce n the plannng of publc sevces, an analyss of the costs of jont collecton of dsposal and ecyclng waste seems of geat elevance. Ths pape ams to contbute to the above ongong debate by analysng the cost stuctue of a sample of moe than 500 Italan muncpaltes that povded waste collecton and dsposal sevces dung yeas Fom a methodologcal pont of vew, we wll take nto account, on the one hand, the mult-poduct natue of the MSW sevce by allowng fo sepaate outputs fo waste smply taken to dsposal stes o ncneated and waste sent fo ecyclng, and we wll use, on the othe hand, a flexble cost functon model that s well equpped to measue scope and scale economes at dffeent output levels. The emande of the pape s oganzed as follows. In the next secton the elevant lteatue wll be befly evewed. In secton 3 we wll pesent ou empcal cost functon model. In secton 4 we wll pesent ou dataset an we wll show some fst descptve statstcs. Secton 5 wll show ou man esults, whle secton 6 concludes.. Lteatue evew Statng fom the semnal woks of Hsch (1965) and Stevens (1978), scholas have analysed the costs of the efuse collecton ndusty by nvestgatng manly ssues such as the optmal scale of opeaton and the effcency compason between pvate and publcly owned opeatos. 3 Oveall, albet thee s some vaance acoss studes, the esults ae pontng towads the exstence of scale economes fo elatvely small communtes that ae exhausted when the populaton eaches a cetan theshold (50,000 nhabtants accodng to Stevens, 1978). Anothe common esults s that, athe than the type of owneshp tself, the key facto whch s moe lkely to bng cost savngs n waste management actvtes s the oganzaton of compettve tendeng pocedues. Howeve, the bulk of the empcal papes have made use of athe ad hoc smple cost functon models. 4 In a typcal study, (aveage o total) costs ae egessed on output (a measue of pck up ponts o of the quantty of waste collected n a yea) and othe explanatoy vaables wthout takng nto consdeaton the ole of nput pces, and wthout espectng some common standad mcoeconomc theoy assumptons (.e. the so called egulaty condtons, such as Shephad's lemma, lnea homogenety wth espect to nput pces, and so on). An unde exploed topc, despte ts nceasng elevance, s the mult-poduct natue of the efuse collecton sevce. Whle n some nstances the costs of ecyclng have been analysed by 3 See Bohm et al. (010) fo a compehensve suvey on the fst ssue and Bel et al. (010) fo updated efeences on the second ssue. 4 Antonol and Flppn (00) epesents one of the few exceptons. 3

5 ncludng the shae of waste sent fo ecyclng among the egessos, thee ae vey few papes that jontly consde dsposal and ecyclng. The pesent pape ams to contbute to the lteatue n both espects. Fom a methodologcal pont of vew, we wll estmate a Composte cost functon model, mposng estctons n ode to ensue that estmated costs ae ognatng fom a well-behaved cost functon specfcaton. In dong so, waste dsposed and waste sent fo ecyclng ae consdeed as two sepaate but nteacted outputs, so that t wll be possble to nfe whethe economes of scope ae chaactesng the povson of both sevces..1 Empcal studes of the costs of ecyclng Caoll (1995) focused on ecyclng costs only and found fo a sample of 57 Wsconsn ctes obseved n 199 that aveage ecyclng costs pe household wee negatvely coelated to a measue of populaton densty and to a vaable accountng fo n-house povson. Moeove, scale economes wee found to be neglgble. Most mpotantly, compang hs esults wth the ones stemmng fom the lteatue nvestgatng gabage collecton costs, the autho found many smlates between the two technologes chaactesng waste dsposal and waste sent fo ecyclng. 5 Bel and Fageda (010) estmated a total cost functon on a sample of 65 muncpaltes n metopoltan aeas of the Spansh egon of Galca fo yea 005, and ncluded among the egessos a vaable accountng fo the pecentage of the total waste volume that was desgnated fo ecyclng. Snce the coeffcent was found to be not sgnfcantly dffeent fom zeo, the authos concluded that: the envonmental advantages deved fom pomotng ecyclng actvtes do not seem to lead to an mpotant ncease n the cost of sold waste collecton. Hence, the pesent esults suggest that local govenment would do well to pomote such ecyclng actvtes (Bel and Fageda, 010, p. 19). Bohm et al. (010) analysed both sold waste dsposal and ecyclng actvtes on a sample of 48 US communtes fo yea Two quadatc cost functons (one fo dsposal, one fo ecyclng) wee smultaneously estmated usng Zellne's SUR model. 6 Whle the aveage cost functon fo dsposal was found to be eveywhee deceasng, hghlghtng the pesence of 5 Fo example, Hsch (1965), wokng on a sample of 4 ctes and muncpaltes n the St Lous aea n 1960, suggested the pesence of constant etuns to scale. In a smla ven, Stevens (1978) estmated a Cobb Douglas cost functon (ncludng the pce of labou among the egessos) on a sample of 340 US publc and pvate fms, and found that, whle pvate opeatos wee bette pefomes, economes of scale wee exhausted at populaton szes above 50,000 nhabtants. 6 The authos pesented estmates whee nput pces wee ncluded among the egessos, too, but the usual mcoeconomc theoy popetes ensung well-behaved cost functons (.e. Shephad's lemma, homogenety of degee one n nput pces, concavty) whee nethe mposed on the estmaton no checked afte havng estmated the model. 4

6 nceasng etuns to scale, the one fo ecyclng was exhbtng a U shape, suggestng that, afte a cetan theshold, the costs fo ecyclng wee nceasng shaply. Callan and Thomas (001) ae, to the best of ou knowledge, the only avalable study whee dsposal and ecyclng ae jontly analysed n a context of a mult-poduct cost functon famewok. Usng a sample of 110 muncpaltes n Massachusetts obseved fo yeas , they estmated two sepaate cost functons fo the two sevces, each of whch was ncludng an nteacton tem between outputs. By dong so, they wee able to measue, togethe wth scale economes, scope effects too. The esults suggested the pesence of constant etuns to scale fo dsposal and nceasng etuns to scale fo ecyclng. Most mpotantly, the coeffcents on the nteacton tems wee both found to be negatve, and the computatons efeng to an hypothetcal aveage sample fm evealed the pesence of scope economes of the ode of 5% Model specfcaton As aleady ponted out, to the best of ou knowledge, only Antonol and Flppn (00) analysed the technology of the waste collecton secto by estmatng a well-behaved cost functon whch satsfes the egulaty condtons. Usng data on 30 Italan waste and dsposal collecton fms fo yeas , they estmated a system of equatons, ncludng a Tanslog cost functon and the assocated cost-shae equatons, by applyng the teatve Zellne s (196) seemngly unelated egesson (SUR) technque. The esults suggest the pesence of scale economes fo small and medum-szed fms, whle the lagest fms n the sample wee opeatng n an output egon exhbtng dseconomes of scale. In a smla ven, ou poposed eseach stategy wll stat wth the estmaton of a Tanslog cost functon (TS): ln C 0 1 lny 1 ln P l j lny l j ln P ln P lny l j C lny ln P whee C efes to the total cost of poducton, Y efes to outputs (n ou two-output case, j = Dsposal (D) and Recyclng (R)), P ndcates facto pces (n ou thee-nput case, l = Labo (L), Captal (K) and Enegy (E)), and C s a andom nose havng appopate dstbutonal popetes to eflect the stochastc stuctue of the cost model. [1] 7 Unfotunately, the authos wee not povdng estmates of scale and scope economes fo dffeent output levels and fo dffeent combnatons of outputs. 5

7 The assocated nput cost-shae equatons ae obtaned by applyng the Shephad s Lemma to expesson [1] 8 S ln Y ln P [] l l l whee s the eo tem elatng to the cost-shae. Howeve, due to ts log-addtve output stuctue, the Tanslog model suffes fom the well-known nablty to evaluate cost behavo when any output s zeo. Ths has been poved to yeld uneasonable and/o vey unstable values of the estmates fo scope economes. Fo such a eason, empcal studes based on the Tanslog specfcaton often ely on measues of pawse cost complementates fo analyzng cost syneges between outputs 9. To ovecome the above poblems, Pulley and Baunsten (199) poposed as an altenatve functonal fom fo mult-poduct technologes the Composte Specfcaton (CS). The CS cost functon ognates fom the combnaton of the log-quadatc nput pce stuctue of the TS specfcaton wth a quadatc stuctue fo multple outputs. Ths makes the model patculaly sutable fo empcal cost analyss. The quadatc output stuctue s appopate to model cost behavo n the ange of zeo output levels and gves the CS specfcaton a clea advantage ove the TS fom as fa as the measuement of both economes of scope and poduct-specfc economes of scale ae concened. 10 In addton, the log-quadatc nput pce stuctue can be easly constaned to be lnealy homogeneous. The CS cost functon s wtten as: lnc ln[ 0 1 Y 1 lnp l j YY l j j lnp lnp l Y lnp] C [3] and the coespondng nput cost-shae equatons ae 8 Cost-shaes ae computed as S = (X P )/C. By Shephad s Lemma X = C/P, whee X s the nput demand fo the th nput, so that S = lnc/ lnp. 9 Fo a twce contnuously dffeentable cost functon, cost complementates ae pesent at Y' f C( Y'; P) CCj ( Y'; P) 0, Y Y j j fo all Y ' [0,Y]. Cost complementates between two poducts mply that the magnal cost of poducng one output deceases as the quantty of the othe good s nceased. Baumol et al. (198) have shown that a mult-poduct cost functon chaactezed by weak cost complementates ove the full set of outputs up to the obseved level of output exhbts scope economes. 10 See Pacenza and Vannon (004) and Pacenza et al. (010), fo moe detals on CS-type models and fo some applcatons to the cost analyss of mult-poduct fms. 6

8 S Y 0 l ln P l l Y 1 j Y Y j j 1 Y ln P [4] Gven the egulaty condtons ensung dualty between the poducton functon and the cost functon, the CS specfcaton does not mpose a po estctons on the chaactestcs of the undelyng technology. Thus, t s a flexble fom n the sense of Dewet (1974). To be consstent wth cost mnmzaton, [1]-[] and [3]-[4] must satsfy symmety ( j = j and l = l fo all couples, j and, l ) as well as the followng popetes: a) non-negatve ftted costs; b) nonnegatve ftted magnal costs wth espect to outputs; c) homogenety of degee one of the cost functon n nput pces ( = 1 and l l = 0 fo all, and = 0 fo all ); d) non-deceasng ftted costs n nput pces; e) concavty of the cost functon n nput pces. Symmety and lnea homogenety n nput pces ae mposed a po dung estmaton, whlst the othe egulaty condtons ae checked ex-post. Theefoe, as a second step of ou analyss, we wll estmate the Composte cost functon system [3]-[4] and we wll compae the esults wth the one stemmng fom the Tanslog system [1]-[]. 4. Data Descpton Ou dataset efes to a balanced panel of 59 Italan muncpaltes povdng waste dsposal and ecyclng sevces ove the peod , fo a total of 1587 pooled obsevatons. The sample composton by geogaphcal aea, owneshp fom and output mx s pesented n Table 1. 39% of obsevatons efe to muncpaltes localzed n Nothen and Southen Italy, espectvely, whle the emanng % ae localzed n the cental egons of the county. As to the oganzatonal fom chosen to povde the sevce, n-house povson fom accounts fo 10% of the total sample, and s mostly concentated n the South. A smla patten can be obseved fo ntemuncpal patneshp, whch accounts fo only 8% of the muncpaltes (wth a pevalence n the South). Fnally, the lmted esponsblty company s by fa the most popula judcal fom chosen to oganze the efuse collecton sevce (8% of the ente sample and 94% of muncpaltes n the Noth) Unfotunately, data lmtatons pevent us to dsentangle copoatons whch ae owned by pvate opeatos fom lmted companes whose shaes ae stll n the hands of the local govenments. Theefoe, n the subsequent cost analyss we wll not be able to sepaate the effects of copoatzaton (.e. the tansfomaton of the judcal fom wthout mplyng a change n the owneshp) fom the ones stemmng fom pvatzaton. See Cambn et al (011) fo an attempt to measue the mpact of copoatzaton on the costs of a sample of Italan local publc tanspot fms. 7

9 Tunng now towads ou man vaable of nteest,.e. ecyclng actvtes, Table 1 shows that the shae of the total waste volume desgnated fo ecyclng s 0%. Howeve, ths aveage value s heavly dependent on the moe vtuous Nothen muncpaltes (whee waste sent fo ecyclng accounts fo 37% of the total), whle the shaes of ecyclable waste collected n Southen and Cental egons of the county ae athe lmted (7% and 13%, espectvely). On the whole, ou sample can be consdeed as faly epesentatve of the ente populaton. In fact, offcal data (see Chades and Ton, 008) show statstcs whch ae vey smla to the ones epoted above. 1 Data on costs and output quanttes ae obtaned fom annual MUDs (.e. annual declaatons concenng muncpal sold waste collecton) whch have been povded by Ecoceved. Input pces have been computed by ntegatng the nfomaton avalable n the MUDs wth addtonal nfomaton dawn fom questonnaes sent to the fms (o oganzatonal stuctues) managng the sevce n the muncpaltes. Total cost (C) s the sum of labo, captal, and enegy costs of the muncpaltes. 13 The two output categoes ae tons of MSW dsposed (Y D ) and tons of MSW ecycled (Y R ). Poductve factos ae labo, captal and enegy. The pce of labo (P L ) s gven by the ato of total salay expenses to the numbe of employees. Captal pce (P K ) s obtaned by dvdng depecaton costs by the captal stock. 14 Summay statstcs on outputs, nput pces and shaes as well as othe demogaphc and uban vaables ae povded n Table. 5. Estmaton and Results Both the TS and CS specfcatons of the mult-poduct cost functon ae estmated jontly wth the assocated nput cost-shae equatons. In ode to ensue that the cost functons ae lnealy homogeneous n nput pces we nomalze total cost and nput pces by the pce of enegy. Because the thee shae equatons sum to unty, to avod sngulaty of the covaance matx only the labo and captal equatons (S L and S K, espectvely) ae ncluded n the systems [1]- [] and [3]-[4]. Befoe the estmaton, all the ght-hand sde vaables wee standadzed on the espectve sample aveage values. Paamete estmates wee obtaned va a non-lnea GLS 1 Fo example, offcal data epot that, n 005, 11% of populaton (% n the South) was ecevng efusal collecton sevces fom muncpaltes by means of n-house aangements. In the same yea, the shae of ecyclng ove total efuse collecton was 4% (38% n the Noth, 19% n the Cental Regons and 9% n the South). 13 Consstently wth the lage majoty of empcal papes n ths feld, we ely on muncpal data. It must be acknowledged that the epoted cost data mght n pncple ovestate the actual costs n the case n whch the local publc admnstatons ae contactng wth pvate fms fo the povson of the sevce. Stevens (1978, p.441) tackles ths ssue and agues that the cost appoach can be eled on. See also Caoll (1995, p.19) and Hsch (1965, p. 91). Ths ssue should howeve be mtgated by the completon of the efom geaed to the exclusve assgnment of the sevce though compettve tendeng pocedues. 14 Followng Antonol and Flppn (00), we assume that the pce of fuel s the same fo all muncpaltes n the sample. 8

10 estmaton (NLSUR), whch s the non-lnea countepat of the Zellne s teated seemngly unelated egesson technque. Ths pocedue ensues estmated coeffcents to be nvaant wth espect to the omtted shae equaton (Zellne, 196). The summay esults of the NLSUR estmatons fo the TS and CS models ae pesented n Table The fst ows pesent the estmates of cost elastctes wth espect to outputs and facto pces fo the aveage muncpalty. 16 The latte ae vey easy to ecove fom TS model, n that CY, whle S s smply the estmate of β (see equatons [1] and []). In the CS model the computaton of output and facto-pce cost elastctes s a lttle bt moe cumbesome: CY 0 j 1 j j j [5] S 0 1 j j [6] By lookng at the fgues epoted n Table 3, t appeas that the two estmated cost functon models ae pefomng n a athe smla way: the estmates of labou (S L ) and captal (S K ) pce elastctes ae aound 0.45 and 0.06 n both cases, and the same patten apples to the estmates of the output elastctes: CY ( D CY ) s 0.78 (0.3) fo the TS model and 0.76 (0.5) fo the CS model. R The summay statstcs ae qute smla, too. The R fo the cost functon s 0.93 n both cases, whle the R fo the labo-shae and captal shae equatons ae hghe fo the CS specfcaton. 17 McEloy s (1977) R can be used as a measue of the goodness of ft fo the NLSUR system. The esults suggest that the ft s oughly the same fo both specfcatons. Moe goously, the Vuong s (1989) statstcs fo selecton among non-nested models (VLR test), that conssts n nomalzng the standad LR test n ode to account fo the fact that the models to be compaed ae not nested, s sgnfcantly dffeent fom zeo. We must theefoe conclude that the CS model does a bette job n descbng obseved data. Moeove, t enjoys a clea advantage ove the TS model as fa as the measuement of scope and scale economes s concened, as t has been dscussed n secton 3. Scale economes (SE) can be measued by computng the nvese of the sum of output cost elastctes, 15 The Tanslog model s estmated wth NLSUR so that t s staghtfowad to make compasons wth the Composte model. Howeve, we estmated also the TS model usng teated GLS as well as maxmum lkelhood estmatos. As expected, the esults ae vtually unchanged acoss the thee dffeent estmaton pocedues. 16 The aveage muncpalty (the pont of nomalzaton) coesponds to an hypothetcal councl opeatng at an aveage level of poducton fo each output and facng aveage values of the nput pce vaables. 17 A smla patten can be obseved by compang the estmated sums of squaed eos (SSE) of the cost and nputshae equatons. 9

11 whle scope economes (SCOPE) ae computed by compang the costs of specalzed poducton wth the costs of jontly povdng Y D and Y R : SE = 1/( CY + D CY ) [7] R C(YD, 0) C(0, YR ) SCOPE = 1 C(Y, Y ) D R Table 3 hghlghts that the aveage muncpalty, whch collects 17,1 tons of Y D and 3,770 tons of Y R, and povdes efuse collecton sevces fo a populaton of about 4,500 nhabtants, exhbts constant etuns to scale and enjoys scope economes of the ode of %. Ths means that, by doublng the amount of both dsposal and ecyclng, costs wll double as well. Moeove, consstently wth the esults found by Callan and Thomas (001), thee s an ncentve to jontly povde both sevces. 18 Fully explotng the potental of ou CS flexble cost functon model, we can evaluate f and how scale and scope economes ae changng f the sze of the muncpalty and/o the output mx changes. Movng along ow A of Table 4 t s possble to smulate how much waste dsposal costs ncease wth sze (assumng that ecyclng sevces ae not povded). It appeas that thee ae constant etuns to scale up to =1 (.e. up to Y D = 17,1 tons), and deceasng etuns to scale n coespondence of lage output levels. Smlaly, the fgues epoted n ow B suggest that the same patten apples to ecyclng actvtes. 19 Howeve, dseconomes of scale ae found to be lage fo ecyclng than fo dsposal. 0 The costs of jont poducton C(Y D, Y R ) ow C ae always lowe than the sum of the costs of specalsed poducton (C(Y D, 0) + C(0, Y R )). Ths s suggestve of the fact that the cost functon exhbts scope economes at all smulated output levels, thus justfyng the choce to assgn the two sevces though a sngle tende. Howeve, scope economes ae athe lmted (and not sgnfcantly dffeent fom zeo) up to =1, and become moe mpotant at hghe output levels (7% fo = 4 and 14% fo = 8). The esults fo aggegate scale economes summaze the pattens epoted above. The fgues epoted n the last ow of Table 4 mply that, by doublng the amounts of efuse collecton [8] 18 The esults of the Tanslog specfcaton show the pesence of cost complementates, snce the coeffcent on the paamete α DR of equaton [1] s negatve (-0.1) and statstcally sgnfcant. 19 The pesence of constant etuns to scale fo elatvely small muncpaltes s consstent wth Caoll (1995), who was usng a sample of muncpaltes of an aveage populaton sze of 6,84 nhabtants. In addton, the fndng of scale dseconomes n coespondence wth hghe output levels s consstent wth the analyss conducted by Antonol and Flppn (00), as fa as dsposal s concened, and wth the outcomes obtaned by Bohm et al. (010), as fa as ecyclng s concened. 0 Fo example, movng fom =1 to =8, costs ncease by a facto of 9 fo dsposal and by a facto of 10.9 fo ecyclng. 10

12 (both dsposal and ecyclng), costs ae doublng up to =1. At muncpalty szes above the sample mean, howeve, oveall dseconomes of scale appea, but the pesence of scope economes countebalances the effect of deceasng etuns to scale fo both ecyclng and dsposal actvtes. Theefoe, the esultng estmates of aggegate scale dseconomes ae found to be not vey lage. 1 In spte of the fact that Table 4 shows estmates elatve to sx dffeent hypothetcal muncpaltes, the fgues epoted ae qute plausble. Fo example, the 004 Repot on waste collecton n the povnce of Mlan ndcated that the pe capta aveage cost was nceasng wth the sze of the towns, passng fom 83.3 (110) euos fo muncpaltes wth less than 5,000 (moe than 30,000) nhabtants up to 151 euos fo the cty of Mlan. By dvdng C(Y D, Y R ) by the populaton sze (fst ow), we obtan a vey smla patten, confmng that ou model fts the data qute well. Snce ou pape mostly focuses on ecyclng, we want now to nvestgate to what extent dffeent shaes of ecyclable waste collecton ae affectng the level of costs. Fgues 1a) and 1b) plot the behavou of costs (on the vetcal axs) fo dffeent pecentage values of the ato Shae R = Y R /(Y D +Y R ). Each cuve coesponds to a specfed level of the total quantty Y D +Y R. Smlaly to what has been done n Table 4, the muncpalty sze has been scaled up and down by multplyng and dvdng the aveage sample quanttes by the paamete. The shapes of the soquant cuves offe some vey nteestng nsghts. As expected, costs ncease n coespondence wth hghe shaes of ecyclng, but ths happens especally at hghe pecentages and fo muncpaltes wth moe than 100,000 nhabtants. The jont nteplay of scope economes and deceasng etuns to scale fo the ecyclng technology mples that: a) It s not vey costly to ncease the pecentages of ecyclng up to 30%-35% at all muncpaltes szes. Fo example, nceasng ecyclng shaes fom 10% to 0% would mply that total costs ncease by about 4% n coespondence of all estmated szes (.e. fo angng fom 0.5 to 8). Moeove, fo muncpaltes of a populaton sze of about nhabtants ( =8), the ncease of Shae R fom zeo up to 10%-15% mples a slght educton of total costs; b) It s not vey costly to ncease even futhe the pecentages of ecyclng fo elatvely small muncpaltes; 1 The esults of the Tanslog specfcaton ae emakably smla also wth espect to the estmates of scale economes fo muncpaltes lage o smalle than the sample aveage. Ths s due to the fact that the effect of economes of scope s stll domnatng ove the effect of deceasng etuns to scale fo ecyclng. 11

13 40%. 3 The above esults can be patally econcled wth some of the esults summazed n secton c) It s ndeed vey costly to ncease the ato Shae R beyond cetan levels fo lage muncpaltes. Fo example, when = 8, costs ncease by 3.5% f Shae R nceases fom 0% to.1. Bel and Fageda (010) ae wokng on a sample of a much smalle sze as compaed to ou sample of Italan muncpaltes. Even f we ae usng a dffeent methodology, esults a) and b) ae consstent wth the absence of sgnfcant effects of ecyclng shaes on total costs found fo Galcan muncpaltes. Howeve, snce ou flexble functonal fom allows us to nvestgate the shape of the cost functon at all output levels, we can bette qualfy the fndngs. Ou estmates suggest that, fo muncpaltes of a populaton sze above 50,000 nhabtants, the mpact of Shae R s not neglgble anymoe, and becomes vey stong n coespondence wth hgh values of. Bohm et al. (010) epot nceasng etuns to scale fo muncpaltes that ecycle up to 13,00 tons and deceasng etuns to scale fo lage quanttes. Ou sample of Italan muncpaltes exhbts deceasng etuns to scale, too, but they appea at lowe output egons (at about 4,000 tons). We beleve that ou analyss can be useful fo polcymakes who ae nteested n pusung stateges amed at nceasng the volume of ecyclng sevces. As aleady ponted out, ecyclng shaes ae stll athe low n Italy, especally n the Southen egons. Ou fndngs suggest that, keepng constant the total amount of waste collected, t s woth to expand ecyclng pogams whee the ecyclng shaes ae vey low (espectve of the sze of the muncpalty), and, n the case of hghe statng levels of Shae R, whee the populaton sze s below 150,000-00,000 pesons. Moeove, as agued by Bohm et al. (010), the exta costs epoted n Fgues 1a) and 1b) ae not takng nto account possble evenues stemmng fom the sale of ecyclable mateals, as well as possble savngs n the total waste collected due to a moe esponsble and envonment fendly behavou on the pat of households. 4 Both aguments should have the effect of flatteng the shape of the cost functons plotted n Fgue 1, theeby enfocng ou aguments n favou of the mpovng of ecyclng actvtes. 3 Notce that fo muncpaltes wth populaton above 100,000 nhabtants, Shae R s on aveage 18% wth a maxmum value of 4%. Theefoe, one should use patcula cauton when ntepetng esults fo lage councls (.e. when = 4 and = 8), because the cuves n Fgue 1b patally ely on out of the sample smulatons. 4 As stated by the authos: Household souce educton effots pesumably complement ecyclng pactces. Households that ncease ecyclng may smultaneously seek ways to educe the use of shoppng bags and beveage contanes (Bohm et al., 010, p.867). 1

14 5.1 Extended model As a fst obustness check, we have splt the sample and un sepaate egessons fo small, medum sze and lage muncpaltes, as well as fo the thee dffeent geogaphcal aeas. The esults ae vey smla acoss sub-samples. Howeve, ou baselne model s, admttedly, vey pasmonous, n that t only consdes output quanttes and nput pces as ght hand sde vaables. Theefoe, we have enched ou specfcaton by addng othe explanatoy vaables that have been usually consdeed n the lteatue. Table 5 shows the esults of the estmates of ou extended TS model 5, whee a tme tend t, sze dummes, geogaphcal dummes, densty, and oganzatonal fom dummes have been ncluded among the egessos. In patcula, small and medum ae dummy vaables whch dentfy muncpaltes whee nhabtants ae less than 0,000 o ncluded n the 0,000-50,000 ange, espectvely. Densty s measued by the numbe of pesons pe squae km. 6 In house and Intemun take the value of 1 n the cases n whch waste s dectly collected by the local authoty o though coopeaton between dffeent muncpaltes. The emanng categoy, Cop, dentfes the cases n whch the sevce s povded by a company, whch may be a pvate fm, a State-owned fm, o a pvate publc patneshp. 7 The second column of Table 5 epots the estmates of the extended model. The coeffcent of t s not statstcally sgnfcant, so that, n the thee yea peod unde nvestgaton, thee has not been a sgnfcant technologcal pogess. Small and medum szed ctes appea to be chaactezed by lowe collecton costs as compaed to muncpaltes that seve moe than 50,000 ctzens (the omtted categoy). Moeove, the costs ae estmated to be lowe n the Nothen and Cental egons of the county, confmng ou a po expectatons. The esults on owneshp type and Densty ae ntgung and deseve moe dscusson. The negatve and sgnfcant coeffcent on In house suggests that, as compaed to the omtted categoy (Cop), n house aangements ae chaactezed by lowe costs. Albet the esults eached by the lteatue ae athe mxed (Bel et al., 010), ou fndng s somewhat contay to expectatons. We have two possble explanatons fo t. Fst, t s possble that fo efusal collecton sevces whch ae dectly povded by the muncpalty, some costs categoes (depecaton, nteests on debts) ae not fully epoted, so that costs esult to be undeestmated. As a obustness check, we have un egessons (of both systems [1]-[] and [3]-[4]) afte havng deleted the The estmates of the CS model, whch ae avalable upon equest, ae vey smla. We decded to pesent the esults of the TS model fo ease of exposton, snce the estmated coeffcents can be staghtfowadly ntepeted by the eade. 6 We have used also the numbe of homes pe squae km, o the numbe of buldngs pe squae km, as altenatve measue, obtanng dentcal esults. 7 Whle data lmtaton pevent us to dsentangle the thee subcategoes of Cop, offcal data epot that n % of the Italan populaton was seved by muncpaltes though n house aangements, 58.5% by State owned fms, and only 30.4% by pvate opeatos. Theefoe, a lage pat of muncpaltes classfed as Cop (66%) oganze gabage collecton by elyng on publcly owned fms. 13

15 obsevatons whee the dummy vaable In house was equal to one. The esults concenng scale economes and the mpact on costs of the shae of ecyclng ae vtually unchanged. Secondly, by lookng at the descptve statstcs epoted n Table 1, t s easy to ealze that 38 of the 53 muncpaltes wth n house aangements ae localzed n the South, whle n the othe two egons such an owneshp fom s clealy magnal. Consdeng that, as epoted by Chades and Ton (008) 8, the shae of n house aangements n Italy has educed fom 34% n 1996 to 11% n 005, t mght be the case that muncpaltes that have decded to keep a dect management of the waste collecton sevce ae elatvely moe vtuous than the ones that have decded (o have been foced) to change the oganzatonal fom. Pusung ths lne of nvestgaton, we have un sepaate egessons fo the thee geogaphcal aeas. Qute nteestngly, whle the coeffcent on In house emans sgnfcant and shows a lage effect (-0.1) fo muncpaltes n the South (whee the populaton seved wth n house aangements has educed fom 11 mllon pesons to 4 mllon pesons fom 1998 to 007), t becomes postve and sgnfcant (0.17) fo muncpaltes n the Noth. Fnally, t must be consdeed that muncpaltes classfed as In house ae of a elatvely smalle sze. By unnng egesson on the sub-sample of muncpaltes wth less than 0,000 nhabtants, we found that In house keeps ts postve sgn but loses sgnfcance. The coeffcent of Intemun s postve but not sgnfcant. Whle Bel and Mu (009) and Soensen (007) offe aguments and some empcal esults n favo o aganst ntemuncpal ageements as a way to educe costs, ou esults, whch show no sgnfcant effect, ae nconclusve wth espect to ths mpotant ssue. 9 As a fnal emak, we must ecall that ou omtted categoy, Cop, s ncludng mostly publcly owned fms (see footnotes 7 and 11), so that we ae not able to examne the effect of full (o patal) pvatzaton on costs. Ths must be consdeed f one wants to coectly ntepet and appecate ou fndngs fo the vaables Intemun and In house. The coeffcent on Densty s found to be postve and sgnfcant. It s not ae n ths feld of studes to ntepet the sgn and magntude of such a coeffcent as evdence of the exstence of economes\dseconomes of densty. 30 Howeve, we thnk that n the case of the efuse collecton ndusty, gven the hgh coelaton exstng between muncpalty sze and degee of ubanzaton as poxed by a densty measue, t s not appopate to make such an nfeence. A postve 8 The authos found, fo a sample of Italan muncpaltes, a negatve mpact of In house aangements on costs, too. 9 Bel and Fageda (009), wokng on Spansh data, ague that ntemuncpal ageements can be used as a way to each scale economes fo elatvely small muncpaltes, whle Soensen (007), wokng on Nowegan data, undelnes the dffcultes of managng the sevce when the owneshp s vey dspesed, as n the case of ntemuncpal jont ventues. Consstently wth Soensen s analyss, Gaone et al. (010) found fo a sample of Italan utltes opeatng n gas, wate, electcty and efuse collecton n the yeas , a postve and sgnfcant mpact of a poxy of Intemun on total costs. 30 Compae, fo example, the comments offeed by Bohm et al. (010) and Caoll and Thomas (001), who both found a postve coeffcent on Densty (measued as pesons pe squae mle and numbe of homes pe squae mle, espectvely). 14

16 coeffcent could ndcate, as suggested by Bohm et al. (010), that hgh-densty muncpaltes may ncu hgh costs to tanspot waste due to the nablty to opeate vehcles n densely populated uban aeas, 31 as well as to the need to dve towads emote landflls fo dsposal. In ode to elaboate moe on ths, we have splt Densty nto two vaables, used as poxes fo hozontal and vetcal degees of ubanzaton: Populaton Populaton Buldngs Densty = = = UbVER x Ub HOR [9] Km Buldngs Km The last column of Table 5 hghlghts that both coeffcents ae postve and sgnfcantly dffeent fom zeo, but the mpact of Ub HOR s much hghe. Theefoe, the esults ae suggestve of the fact that congeston poblems ae moe seous when the populaton s spead ove seveal buldngs wth fewe floos than n the case wth hghe vetcal development of buldngs nsstng on a gven suface. The tadtonal appoach to measue densty economes n netwok ndustes (Caves et al., 1985), eques to ench the models [1]-[] and [4]-[5] by ncludng a poxy fo the sze of netwok (N) as an addtonal output (, j) and to measue densty economes as: DE = 1/( CY + D CY ) [10] R and scale economes as: SE=1/( CY + D CY + R CY ) [11] N The cost elastcty wth espect to N ( CYN ) measues how much costs ncease when the netwok sze becomes bgge, keepng constant the amount of waste (both dsposal and ecyclng) collected. Accodngly, DE s a measue of how costs ae sng when both outputs Y D and Y R ncease, keepng constant the sze of the netwok. When ncludng N (measued by the numbe of homes) and the coespondng nteactons wth output and nput pces n the system [1]-[], we get, fo the aveage sample fm, the followng estmates: 0.19 (s.e. = 0.01) and CYN CY = 0.63 (standad eo = 0.0), D CYR = = 0.0 (s.e. = 0.03). Theefoe, the efuse collecton ndusty n Italy s chaactezed by the pesence of densty economes (DE = 1.). Ths suggests that, n ode to oganze the sevce, fanchsed monopoles at the muncpalty level have to be pefeed ove sde by sde competton. In addton, the pesence of scope economes ponts towads the oganzaton of sngle tendes fo both gabage and ecyclng actvtes. Fnally, oveall scale economes ae 31 Fo nstance, the pesence of naow steets may educe the ablty to use lage, specalzed equpment. In addton, the extent of on-steet pakng may nvolve dffcultes n usng some automated machney, wth the consequence that opeatos ae foced to use moe manual labo. 15

17 found to be constant (SE = 0.99), confmng ou pevous esults fo the baselne model. 3 Theefoe, ou esults suggest that aggegatng neaby councls (whch mples to ncease smultaneously both waste collecton and N) could not bng savngs n total costs. 6. Summay and conclusons Despte the mpotance of the efuse collecton sevce and the sng woes about the mpact of waste dsposal actvtes on the envonment, the empcal lteatue on the costs of gabage collecton and dsposal s athe lmted. The avalable empcal woks mostly concentate on the US, and, most mpotantly, ecyclng actvtes ae aely ncluded nto the analyss. Ou pape povdes fesh evdence on the above ssues by analysng a sample of Italan muncpaltes whch ae obseved n the yeas Fom a methodologcal pont of vew, we jontly consde waste taken to dsposal stes o ncneated and waste sent fo ecyclng n a mult-poduct famewok. Moeove, we wll estmate cost functon models whch ae consstent wth the dualty assumptons of mcoeconomc theoy. Ou esults suggest that, fo a muncpalty of a sze of about 4,500 nhabtants, the efuse collecton ndusty exhbts aggegate constant etuns to scale, whle modeate economes of scope can be enjoyed by smultaneously povdng dsposal and ecyclng sevces. Whle scope economes ae nceasng wth the sze of the councl (up to 14% when nhabtants ae about 300,000), deceasng etuns n the collecton of both gabage and waste sent fo ecyclng ae such that modeate oveall dseconomes of scale appea fo lage muncpaltes. Ou smulatons suggest that t s woth to devote effots to ncease the shae of ecyclng actvtes up to 30%-35%, snce the total costs of efuse collecton would not ncease too much, and ths s especally tue fo elatvely small muncpaltes. The estmates of the extended model add new mpotant nsghts. Fst, efuse collecton costs ae found to be lowe n the Nothen egons of the county and fo muncpaltes wth a populaton below 0,000 nhabtants. Second, whle uban aeas face hghe congeston costs, especally due to hozontal ubanzaton effects, thee s clea evdence of the exstence of densty economes. Fnally, councls that ae elyng on ntemuncpal jont-ventues as oganzaton foms to povde the sevce ae not exhbtng lowe costs. 3 Notce than n the last two columns of Table 5 the coeffcent on Y D s lowe than the estmates epoted fo the baselne model (ncdentally, when addng a poxy fo densty among the egessos, Bohm et al. (010) expeence a smla contacton, too). Couplng ou dscusson about the ole of the vaable Densty wth ou esults fo densty economes (DE), we do not thnk that the estmates of the extended models should be consdeed as suppotve of the pesence of nceasng aggegate etuns to scale fo the aveage fm. Ou ntepetaton s that the vaable Densty s captung pat of the magntude of the output elastcty. CY D 16

18 Fom a polcy pont of vew, we thnk that the above set of esults povde some useful nsghts. Ou computatons suggest that ecyclng pogams should be stongly encouaged, snce total costs ae not lkely to ncease shaply. Ths s patculaly mpotant n a county lke Italy whee, as epoted n ou descptve statstcs, the shae of ecyclng actvtes s somewhat lmted, especally n the South. The pesence of densty economes suggests that fanchsed monopoles could be the bette fom to povde the sevce, whle the exstence of scope economes suggests that tende pocedues should be oganzed so as to consde dsposal and ecyclng actvtes as a sngle bundle. Howeve, snce we found constant etuns to scale up to 1,000 tons of waste collecton (.e. up to a sevce aea of about 45,000 nhabtants), we cannot povde suppot fo the aguments n favou of the consoldaton of the sevce fo small muncpaltes. Fnally, ou esults povde useful nsghts fo manages n chage of the plannng and management of the efuse collecton sevces. In fact, manages must have a pecse dea of the costs of gabage collecton and on the mpact of ecyclng actvtes on total costs when they must decde whethe and to what extent patcpatng to tendeng pocedues o smply when they ae equed to compute the budget plans fo the waste management actvty. 17

19 Refeences Antonol, B. and Flppn, M. (00) Optmal Sze n the Waste Collecton Secto, Revew of Industal Oganzaton, 0, Baumol W. J., Panza, J. C. and Wllg R. D. (198), Contestable Makets and the Theoy of Industy Stuctue, New Yok: Hacout Bace Jovanovch. Bel, G. and Mu M. (009) Intemuncpal Coopeaton, Pvatzaton and Waste Management Costs: Evdence fom Rual Muncpaltes, Waste Management, 9 (10): Bel, G. and Fageda, X. (010) Empcal Analyss of Sold Management Waste Costs: some Evdence fom Galca, Span, Resouces, Consevaton and Recyclng, 54, Bel, G., Fageda, X., Wane M. E. (010) Is Pvate Poducton of Publc Sevces Cheape than Publc Poducton? A Meta-Regesson Analyss of Sold Waste and Wate Sevces, Jounal of Polcy Analyss and Management, 9, 3, Bohm, R. A., Folz D. H., Knnaman T. C., Podolsky M. J. (010) The Costs of Muncpal Waste and Recyclng Pogams, Resouces, Consevaton and Recyclng, 54, Cambn C., Flppn M., Pacenza M., Vannon D. (011) Copoatzaton and Fm Pefomance: Evdence fom Publcly-Povded Local Utltes, Revew of Law and Economcs, 7, 1, Callan, S. J. and Thomas, J. M. (001) Economes of Scale and Scope: A Cost Analyss of Muncpal Sold Waste Sevces, Land Economcs, Novembe, 77 (4), Caoll W. (1995) The Oganzaton and Effcency of Resdental Recyclng Sevces, Easten Economc Jounal, 1,, Caves D. W., Chstensen L. R., Tetheway M. W. and Wndle R. (1985) Netwok Effects and the Measuement of Retuns to Scale and Densty fo U.S. Raloads, n Daughety A., Analytcal Studes n Tanspot Economcs, Cambdge, Cambdge Unvesty Pess, Chades P. and Ton, R. (008) The Uban Waste Secto 11 Yeas afte the Ronch Decee, Bank of Italy Occasonal Papes,. Dewet W. E. (1974), Applcatons of Dualty Theoy, n M. D. Intlgato and D.A. Kendck (eds.), Fontes n Quanttatve Economcs, Vol II, , Amstedam: Noth-Holland Gaone P., Gll L., Rousseau X. (010) Management Dsceton and Poltcal Intefeence n Muncpal Entepses. Evdence fom Italan Utltes, Decembe 8. Avalable at SSRN: Hsch W. (1965) Cost Functons of Uban Govenment Sevce. Refuse Collecton, Revew of Economcs and Statstcs, 47, Knnaman T. C. (005) Why do Muncpaltes Recycle?, Topcs n Economcs Analyss & Polcy, Bekeley Electonc Pess, 5, 1, 5, 1-3. Knnamnan T. C. (006) Examnng the Justfcaton fo Resdental Recyclng, Jounal of Economc Pespectves, 0, 4,

20 Mc Eloy M. (1977), Goodness of Ft fo Seemngly Unelated Regessons: Glahn s R and Hoope s R, Jounal of Econometcs, 6, Pacenza M., Tuat G., Vannon D. (010) Restuctung Hosptal Industy to Contol Publc Health Cae Expendtue: the Role of Input Substtutablty, Economc Modellng, 7, 4, Pacenza M., Vannon D.(004) Choosng Among Altenatve Cost Functon Specfcatons: An Applcaton to Italan Mult-Utltes, Economcs Lettes, 8/3, Pulley L. B. and Baunsten Y. M. (199) A Composte Cost Functon fo Multpoduct Fms wth an Applcaton to Economes of Scope n Bankng, Revew of Economcs and Statstcs, 74, Soensen R. J. (007) Does Dspesed Publc Owneshp Impa Effcency? The Case of Refuse Collecton n Noway, Publc Admnstaton, 85, Stevens B. J. (1978) Scale, Maket Stuctue, and the Cost of Refuse Collecton, Revew of Economcs and Statstcs, 6 (3), Vuong Q. H. (1989), Lkelhood Rato Tests fo Model Selecton and non-nested Hypotheses, Econometca, 57,, Zellne, A. (196) An Effcent Method of Estmatng Seemngly Unelated Regesson and Test fo Aggegaton Bas Jounal of the Amecan Statstcal Assocaton, 58,

21 Table 1. Sample beakdown by geogaphcal aea Noth Cente South Total Numbe of muncpaltes In house % 9% 18% 10% - Intemuncpal patneshp 4% 4% 15% 8% - Copoaton 94% 87% 67% 8% Shae of Recyclng 37% 13% 7% 0% Table. Summay Statstcs Mean Std. dev. Mn Max Total Cost (10 3 euo) 5,436 3, ,065 Output Waste Dsposed (tons) 17,1 71, ,46,18 Waste Recycled (tons) 3,770 13, ,11 Input pces Pce of captal Pce of labo (euo) 36,607 5,735,663 6,613 Cost shaes Captal shae (%) Labo shae (%) Othe vaables Densty , ,441 Populaton 41,058 14,7 993,711,491 Numbe of homes 19,336 67, ,150,547 Numbe of buldngs 4,960 7, ,713 Shae of ecyclng (%)

22 Table 3. NLSUR estmaton: Tanslog (TS) and Composte (CS) cost functon models a TS MODEL Output and facto pce elastctes b CY D 0.781*** (0.010) CY R 0.305*** (0.011) S L *** (0.0030) S K *** (0.0019) Scale and Scope Economes b SE (0.0088) CS MODEL *** (0.008) 0.466*** (0.0099) *** (0.008) *** (0.057) (0.0057) SCOPE ** (0.0089) Cost complementates CC *** - (0.0070) Cost functon R SSE c Labo shae equaton R SSE Captal shae equaton R SSE System log-lkelhood Goodness of ft d VLR test statstc e CS vs. TS: VLR = 8.03*** a Estmated asymptotc standad eos n paentheses. b The values ae computed at aveage values of output and nput pce vaables. The coeffcent subscpts ae D = dsposal, R = ecyclng, K = captal, L = labo. c Sum of squaed eos. d The goodness-of-ft measue fo the NLSUR systems s McEloy s (1977) R. e See Vuong (1989). The VLR statstc s dstbuted as a N (0,1). *** Sgnfcant at 1 pecent level n a two-taled test. ** Sgnfcant at 5 pecent level. Fo the SE ndex the null hypothess s that t s not sgnfcantly dffeent fom one. 1

23 Table 4. Estmated costs (CS model) fo dsposal and ecyclng at dffeent output levels = 0.5 Y D =4,81 Y R =943 = 0.5 Y D =8,561 Y R =1,865 Scaled outputs a = 1 Y D =17,1 Y R =3,770 = Y D =34,44 Y R =7,540 = 4 Y D =68,488 Y R =15,080 = 8 Y D =136,976 Y R =30,160 Populaton Sze 13,500 5,000 4,500 9, ,000 90,000 Poduct-specfc estmated costs: A) C(Y D, 0) 89 1,784 3,59 7,308 15,136 3,38 B) C(0, Y R ) ,190,497 5,491 1,994 Total (A+B) 1,184,367 4,78 9,805 0,67 45,376 Mult-poduct estmated costs C) C(Y D, Y R ) 1,170,336 4,684 9,439 19,189 39,649 Scope Economes b 0.01 [(A+B)/C]-1 (0.01) Oveall Scale Economes (SE) b 0.99 (0.01) 0.01 (0.01) 0.0** (0.01) 0.04** (0.0) 0.07*** (0.03) * (0.00) (0.01) (0.01) (0.0) a =1 ndcates a muncpalty that collects aveage quanttes of Y D and Y R. The paamete s used to scale up and down the outputs of the aveage muncpalty. Costs ae measued n thousands of euos. b Standad eos n paenthess.*** Sgnfcant at 1 pecent level n a two-taled test. ** Sgnfcant at 5 pecent level * Sgnfcant at 10 pecent level. Fo the SE ndex the null hypothess s that t s not sgnfcantly dffeent fom one. 0.14*** (0.05) 0.94* (0.04) Fgue 1. Costs and Recyclng Shaes 1 a) Muncpaltes below 50,000 nhabtants. costs % 10 % 0 % 30 % 40 % 50 % 60 % 70 % 80 % 90 % 100 % sze = 0.5 sze = 0.5 sze = 1 ecyclng shae

24 1 b) Muncpaltes above 50,000 nhabtants. costs % 0% 40% 60% 80% 100% sze = sze = 4 sze = 8 ecyclng shae 3

25 Table 5. Tanslog estmates of the baselne and extended cost functon models [1]-[] BASELINE EXTENDED MODEL I EXTENDED MODEL II REGRESSORS a MODEL Estmates s.e. Estmates s.e. Estmates s.e. Constant 15.40*** (0.01) *** (0.035) *** (0.057) lny D 0.781*** (0.01) 0.71*** (0.018) 0.707*** (0.018) lny R 0.31*** (0.011) 0.30*** (0.016) 0.9*** (0.016) lny D lny R 0.367*** (0.07) 0.99*** (0.08) 0.301*** (0.07) 0.178*** (0.01) 0.156*** (0.014) 0.161*** (0.014) lny D ln Y R -0.10*** (0.007) *** (0.007) *** (0.007) lnp L 0.448*** (0.003) 0.448*** (0.003) 0.448*** (0.003) lnp K 0.060*** (0.00) 0.060*** (0.00) 0.060*** (0.00) lnp L lnp K -0.54*** (0.018) -0.55*** (0.018) -0.54*** (0.018) 0.034*** (0.006) 0.040*** (0.006) 0.040*** (0.006) lnp L lnp K 0.056*** (0.009) 0.060*** (0.009) 0.060*** (0.009) lny D lnp L 0.005*** (0.001) 0.005*** (0.001) 0.005*** (0.001) lny R lnp L -0.00** (0.001) -0.00** (0.001) -0.00** (0.001) lny D lnp K 0.148*** (0.041) 0.13*** (0.04) 0.133*** (0.041) lny R lnp K (0.09) (0.030) (0.030) t (0.008) 0.00 (0.008) ln Densty *** (0.007) - - ln Ub HOR *** (0.013) ln Ub VER *** (0.008) Noth *** (0.07) *** (0.07) Cente *** (0.0) -0.11*** (0.0) Medum *** (0.034) ** (0.034) Small *** (0.040) *** (0.040) In house *** (0.04) -0.06*** (0.03) Intemun (0.06) 0.01 (0.06) Goodness of Ft b System Log-Lk a Estmated asymptotc standad eos n paentheses. b The goodness-of-ft measue systems s McEloy s (1977) R. The coeffcent subscpts ae D = dsposal, R = ecyclng, K = captal, L = labo. *** Sgnfcant at 1 pecent level n a two-taled test. ** Sgnfcant at 5 pecent level n a two-taled test. All egessos, except fom dummes and t, have been nomalzed on the espectve sample mean values. 4