Optimal regulatory choices in the organization of solid waste management systems: Empirical evidence and policy implications

Abstract

The paper deals with the definition of the territorial partitions within which a specific sub-service of the waste cycle should be entrusted to a monopolistic provider—service-specific optimal territorial areas (SOTAs). In fact, the Italian legislation requires SOTAs to be of an appropriate size (presumed to be at least as large as a province) to ensure the maximum attainable efficiency level, but it gives no guidance on how to empirically identify the optimal size. A range of possible sizes of SOTAs for urban waste collection services is tested in the paper through a multi-stage DEA-based procedure aimed at assessing the impact of regulatory choices on the efficiency of a regulated service. The procedure is applied to data relative to the set of Italian municipalities with a population of over 20,000 residents for the years 2013, 2015 and 2017. A key finding is that, in the case of waste collection services, areas with a population under 57,000 provide the best solution for the size of SOTA. This suggests a possible change in the Italian approach to the regulation of waste services. According to the conclusions obtained, efficiency could be increased by limiting the size of SOTAs (even subdividing the bigger municipalities into more SOTAs) and promoting, instead, the growth of service providers in order to fully exploit technical economies of scale. The system would have big service providers competing for the awarding of services in a high number of small SOTAs, so intensifying the positive effects of competition for the market.