Local Public Service Provision and Delivery Economic Analysis and Policy Evaluation

Abstract

[eng] This dissertation is composed of four empirical studies on local public service provision, production, and local politics. The first study, Chapter 2, looks at inter-municipal cooperation (IMC). IMC has attracted the interest of local authorities seeking to reform public service provision. Cost-saving, together with better quality and coordination, has been among the most important drivers of such cooperation. However, the empirical results on inter-municipal cooperation and its associated costs offer divergent outcomes. By conducting a meta-regression analysis, I seek to explain this discrepancy. I formulate several hypotheses regarding scale economies, transaction costs, and governance of cooperation. While I find no clear indications of the role played by transaction costs in the relationship between cooperation and service delivery costs, I find strong evidence that population size and governance are significant in explaining the relationship. Specifically, small populations and delegation to a higher tier of government seem to offer cost advantages to cooperating municipalities. As an extension of the model, I seek to disentangle service-related transaction costs based on asset specificity and ease of measurability of the service. In the next chapter, I analyze a far-reaching reform of solid waste collection in the city of Barcelona. In 2000, the city was divided into four zones, with four separate solid waste collection contracts being awarded to private firms, with none being allowed to obtain more than two zones, a rule that was revised in 2009 to just one contract per firm. This division of the market via exclusive territories sought to enhance competition in the expectation of the convergence of relative costs, efficiency, and service quality throughout the city. This chapter analyzes and evaluates the creation of lots as a tool of competition with monthly observations of costs and outputs between 2015 and 2019. The main findings are that firms producing in larger zones report higher costs, which increased competition was not sufficient to lead to converging costs, and that none of the firms operate under increasing returns to scale. Based on the results, I recommend creating an additional zone. The chapter further suggests that if a public firm managed one of the zones, the regulator would obtain more reliable information on the service costs and technical characteristics, thus increasing her capabilities as supervisor of the private firms delivering the service in other zones.

Public procurement is frequently used to contract solid waste collection services. Incomplete contracts and transaction costs increase the need for monitoring and supervision. The aim of Chapter 4 is to analyze the usefulness of regulation by competition in such cases. In Barcelona, solid waste collection is regulated by competition, with four delivery zones being contracted out separately. Therefore, it is possible to make relative performance assessments, especially in the areas where the contracted firms operate close to each other. Private firms anticipate stronger competitive pressures near competitors' zones, even after the contract has been awarded, and they compete on quality. This research studies the influence of the proximity between competitors on the quality of service delivery. Monthly data on the number of complaints regarding waste collection in the city’s 73 neighborhoods between 2014 and 2019 is used to evaluate quality. Using count model approaches, our results show that higher quality is provided in neighborhoods closer to other neighborhoods served by a competing firm. Moreover, lower quality is delivered in peripheral neighborhoods, where a comparison with competitors' neighborhoods is much harder, if possible. The results are consistent with the hypothesis that firms strategically manage quality performance and tend to deliver higher quality where they anticipate that monitoring by the regulator is easier. The findings add to the existing knowledge of competition as a regulatory tool used to obtain more information and provide useful insights to policymakers and regulators to better understand firms’ behavior in quality delivery. In Chapter 5, I analyze whether independent local parties affect local public finances in Dutch municipalities using a matching strategy. The main research question is whether local parties make different decisions on municipal finances compared to their national counterparts. Using genetic matching, I can compare municipalities that are similar in their observable characteristics except for the presence of a local party majority in the municipal council. I provide evidence that shows that municipalities with local majorities indeed differ in terms of local spending, specifically they spend more on categories that are more “local-oriented”. I find significant differences in spending on public health and environmental affairs, local public administration and sport, culture, and recreation.