Efficiency in waste management companies: A proposal to assess scale economies

Abstract

This article analyzes the economic efficiency of waste management companies with the aim of verifying the existence of scale economies with respect to separate waste collection preceding reuse, recycling, and recovery. For this purpose, an approach based on partial elasticity is used for a group of companies providing waste management services throughout Italy. Results show that the greater the separate waste collection rate, the higher the total costs incurred by the analyzed companies; this relationship is non-linear since a rise in the separate waste collection rate increases total costs less than proportionally, which gives evidence for the existence of scale economies. The findings also reveal that such a cost advantage is strengthened by a positive interaction effect with population density. These results show that a significant increase in separate waste collection rate could be realized in an efficient way and, thus, without jeopardizing companies’ economic sustainability, which is essential to continue ensuring such important services for the community. One of the main implications of these results concerns policy makers: considering the population density impact, working in certain territories can be more economically convenient for companies; thus, policy makers should support those firms that could be penalized by the contextual conditions.