The Market Structure of Urban Solid Waste Services: How Different Models Lead to Different Results

Abstract

Urban waste services in Portugal have historically been provided together with other services, such as the water services. Despite the lack of discussion on this subject in the literature, some questions have been raised about the gains, in terms of efficiency, of this policy. Following a recent and robust partial nonparametric frontier model, based on order-α, we intend to evaluate the presence of economies of scope in the Portuguese waste sector. Furthermore, we also estimate the economies of scale using the traditional data envelopment analysis. The results show the absence of economies of scope between waste and water (and wastewater) services. In addition, we identify the presence of economies of scale in smaller municipalities. These outcomes might be useful for policy and decision makers in further reforms.

Key Words:

• Economies of scale
• economies of scope
• efficiency
• partial frontier methods
• waste sector

Notes

1. Despite the efforts of the European Commission to minimise this tendency, this remains the most common type of treatment used in Portugal.

2. The State has its branch in the waste sector through the Empresa Geral de Fomento (EGF), the subholding of Águas de Portugal (State company).