Incentive regulation and performance measurement of the Portuguese solid waste management services

Abstract

Measuring the performance of solid waste management services usually uncovers very high potential for gains in efficiency and productivity. This circumstance occurs, naturally, due to the fact that these services are outside the market and because they are subjected to various market failures in their organizational framework. The aim of this study was to examine the Portuguese regulatory model and to measure the performance of the Portuguese solid waste management services in order to identify the major reforms carried out and their outcomes. As a first objective, the sunshine regulatory approach adopted in Portugal, in which performance comparison and its public discussion are the main tools, was investigated. The second objective was to compute the efficiency of the Portuguese solid waste management services by means of the non-parametric technique of data envelopment analysis (DEA), evaluating the Portuguese regulatory model and the existing market structure, as well as the influence of the operational environment on efficiency. The benchmarking frontier technique of DEA is particularly useful in the efficiency measurement of public utilities, in which knowledge of the production function is relatively scarce. Several DEA models were used and they all depicted significant inefficiency. The study also proved that efficiency did not depend on ownership (public or private) and that there was no difference in efficiency between the players, irrespective of whether they were regulated or not.