Efficiency Effects of Unit-Based Pricing Systems and Institutional Choices of Waste Collection

Municipal residential waste costs are rising. Therefore, it is important to introduce measures that lower waste collection and disposal costs. Based on a large panel data set for the Netherlands we show that unit-based pricing systems are more important from a cost-minimizing point of view than the institutional mode of waste collection. In particular, the bag-based and frequency-based pricing systems are preferred. Moreover, dividing the cost effects between cost price and quantity effects, we illustrate that lower administrative costs and a smaller waste quantity are the most important drivers of cost decreases. It also shows that a disadvantage of the bag-based system is that it is not easy to price compostable waste. In addition, if more general cost functions are analyzed, these estimations suggest that there are economies of scale for small municipalities.

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