Are there scale economies in urban waste and wastewater municipal services? A non-radial input-oriented model applied to the Portuguese local government

Abstract

Local government policy intervention, especially by means of structural reform, requires a detailed knowledge of the scale and scope characteristics of the local government services, explicitly solid urban waste collection and wastewater treatment. However, unfortunately little is known about scale economies in Portuguese municipal services, apart from water. The main contribution of this paper is to address this gap in the empirical literature on Portuguese local government. The major objectives of the paper are: (a) to investigate whether scale economies can explain differential council performance in terms of treating wastewater and collecting urban waste and (b) how this might shed light on the question of optimal jurisdictional size, i.e., the quantity of consumed resources and the volume of delivered services that maximize council productivity. By using a non-radial input-oriented model, we examine scale economies and optimal scale size for all 308 Portuguese local councils over the years 2008 and 2015. We find that (dis)economies of scale arise within each council cluster considered and as a probable consequence of combining the activities of two or more councils. We attempt to draw various policy implications from the analysis.