Do municipal mergers reduce the cost of waste management? Evidence from Japan

Abstract

This study investigates whether municipal mergers result in lower waste management costs. We develop a novel virtual merging method based on machine learning techniques to compile the data of the control group and estimate the effect of the large-scale consolidation in Japan on the various costs of managing municipal solid waste. We find that these mergers actually led to an increase in the total cost per ton. Estimation results also reveal that the construction cost increased in the post-merger period, which can be explained by the special bonds provided by the national government for new projects in merged municipalities. By contrast, the processing and management cost is little affected by the mergers, except for the absorption-type mergers and municipalities that never joined waste management associations. These results suggest that municipal mergers might not always bring a substantial scale economy in municipal solid waste management. Policymakers should be careful when promoting municipal mergers in the belief that a scale economy will prevail after the reform.