Expanding the research on the institutional developments in the Dutch waste-collection market

This paper discusses the institutional development of the Dutch waste-collection market in the period 1998-2010. This research is based on ‘Institutional developments in the Dutch waste-collection market’ of Dijkgraaf & Gradus (2008) that discusses the same market from 1998 to 2005. The expansion of the data set makes it possible to obtain results for more observations and to correct for fixed effects. This paper analyses four important findings of Dijkgraaf & Gradus and compares them with the current results. First, analysing the institutional structure of the waste collection market previous literature indicated that contracting out would lead to cost advantages. However, Dijkgraaf & Gradus found that results for contracting out are not stable over time and that the cost advantage deteriorated over time. The current results support this finding, but a important remark should be made that the last few years a trend occurred that municipalities with private collection or collection done by a neighbour or cooperation reduce the costs significantly. Second, Dijkgraaf & Gradus showed that the use of Unit-Based Pricing (UBP) is more cost effective than contracting out. Also in the current results this is the case, but the differences are smaller. This is because the cost effect of UBP is smaller in the current results and because of the above mentioned trend that municipalities with private companies or municipalities that let the waste collect by a neighbour or cooperation show cost advantages in the last years. Third, because previous literature did not correct for the presence of UBP the effect of privatization was overestimated. Current results confirm this finding of Dijkgraaf & Gradus. Fourth, in a sensitivity analysis the cost advantages of the four different UBP systems are compared. Whereas Dijkgraaf and Gradus showed that only the bag-based and weight-based UBP systems reduced costs for all municipalities, the current results show that also the volume-based and frequency-based UBP system reduce the cost significantly for all municipalities.