Measuring Economies of Scale in Australian Local Government: The Case of Domestic Waste Collection in NSW

Abstract

Both international and Australian efforts aimed at estimating economies of scale in local government service provision have been bedevilled by conceptual problems and methodological difficulties. Moreover, this empirical literature has produced mixed results. Nevertheless, Australian policymakers have embarked on a widespread program of structural reform through amalgamation in the apparent belief that significant economies of scale exist. This paper seeks to determine the extent of economies of scale in NSW domestic waste collection for the period 1995/96 to 1999/2000. Although we find some evidence in support of economies of scale, our results suggest resource sharing rather than amalgamation may represent the optimal policy instrument.