A Comparative Study of the Effects of Institutional Arrangements in Municipal Solid Waste Services in Korea

Abstract

In Korea, local governments are primarily responsible for providing municipal solid waste services to citizens. This paper examines the effects of different institutional arrangements and characteristics on cost savings, efficiency gains and productivity in the delivery of municipal solid waste services to citizens. In order to carry out this research, a hybrid cost function approach was employed, and cross-sectional time-series data from local governments of Korea covering a ten-year period (2000–2009) were used for empirical analysis. Empirical findings indicated that there were no effects of contracting-out on cost savings, efficiency and productivity gains in Korea. Specifically, the solid waste service costs were not significantly lower under contracting-out than under direct public delivery. In addition, contrary to the arguments of the proponents of privatization or contracting-out, efficiency and productivity gains were actually higher under direct public delivery than when contracted out.

Keywords:

• municipal solid waste services
• contracting-out
• translog-cost function
• SUR method
• comparative analysis

Notes

1. However, the incineration of organic wastes may be the least preferred method, just above landfill. The advantage of burning organic waste depends on the types of organic waste. Other methods for using organic waste, such as product substitution, animal feed or composting, are always preferred above incineration.

2. In Korea, especially, a waste management policy, including the volume-based garbage disposal system, was successfully implemented to separate recyclable wastes from other solid wastes. In 2010, the recycling ratio of Korea (60.5 per cent) was much higher than in the US (34.1 per cent) (EPA 2011).

3. Bel and Warner (2008) reviewed 18 articles, all of which employed data and cases from the US, Canada and European countries including Switzerland, England and Wales, Ireland, Holland, Sweden and Spain.

4. Among the 164 local governments in Korea, seven metropolitan governments – Seoul, Busan, Daegu, Incheon, Gwangju, Daejeon and Ulsan – as well as Jeju Province were not included, because these governments are especially large compared with the other 156 local governments.

5. Local own source revenues include local tax revenues, revenues from fees and charges, and miscellaneous revenues.

6. For example, three private companies (Pyeonga, Daeseung, Simchang) which are in charge of municipal solid waste collection and transportation in Jongno District, Seoul, have continuously won follow-up contracts over the past decade. In addition, in Yongsan District, Seoul, five private companies (Hangang, Daesu, Hangang General Service, Gangnam, Hanil) – not including Samsung Environment and Donghwa which were excluded in 2012 – have held the status of monopoly in the solid waste service market (Korean Ministry of Environment 1996–2010).

Additional information

Funding

This work was supported by the National Research Foundation of Korea grant funded by the Korean Government [NRF-2013S1A3A2055108].

Notes on contributors

Seong-Young Jeong

Seong Young Jeong is a doctoral student in the Graduate School of Governance, Sungkyunkwan University, Seoul, Korea. His research interests include environmental policy and management, local finance and financial management, and public policy analysis and evaluation.

Seong-Gin Moon

Suho Bae (corresponding author) is associate professor in the Graduate School of Governance, Sungkyunkwan University, Seoul, Korea. His research interests include environmental policy and management, local finance and financial management, and East Asian philosophy of public administration. His recent work has been published in major journals, including Public Administration Review, Papers in Regional Science, American Review of Public Administration, Annals of Regional Science, Economic Development Quarterly, Society and Natural Resources and Contemporary Economic Policy.

Suho Bae

Seong-gin Moon is associate professor and associate dean in the Department of Public Administration and Graduate School of Public Policy, Inha University, Incheon, Korea. His research interests include environmental policy and management, philanthropy and nonprofit organizations. His recent work has been published in major journals, including Public Administration Review, Nonprofit and Voluntary Sector Quarterly, Voluntas, Papers in Regional Science, Business Strategy and Environment, Social Science Quarterly and Organization and Environment.