Cost savings of contracting out refuse collection

The article discusses the possible cost savings of contracting out refuse collection in the Netherlands. Our findings indicate that similar to foreign econometric studies cost savings of approximately 15-20% apply to the Netherlands. Moreover, compared with the existing literature we show that different production technologies apply to internal municipal waste collection units and external refuse collection firms. Different cost functions have to be estimated for the sub-samples. Though significant cost savings exist on contracting out waste collection, households will not experience these cost savings on a one to one basis. Private refuse collection firms must pay VAT while public entities are exempted. Thus, the fiscal system hinders a more pronounced role for private refuse collection firms.