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*** This is the authors` version of the paper. ***
The definitive final version is available at:
http://www.tandfonline.com/doi/full/10.1080/03003930.2017.1395739
*** This is the authors` version of the paper. ***
The definitive final version is available at:
http://www.tandfonline.com/doi/full/10.1080/03003930.2017.1395739
1. Introduction
Intermunicipal cooperation (IMC) has become a major buzzword in public sector
studies, as it offers municipalities a way to increase production scales for selected
public services while continuing to provide other public services on a municipal level
and preserving local autonomy (Allers and van Ommeren 2016). Some authors (e.g.
Hefetz et al. 2012, 2014; Bel and Warner 2015) note that although most research study
results show that IMC has a significant impact on cost savings in waste management, it
is important to examine the internal aspects, such as institutional arrangements,
municipality size, professional management, for-profit orientation, etc.
This research focus is still in its early stages, and space is open for further
investigations. For this reason, we conducted a deeper investigation into the internal
factors, which makes us provide a deep insight into the internal factors of IMC in the
South Moravian Region. Even though IMC is a frequent research topic in international
studies, only a few studies have focused on and sought solutions for this phenomenon in
the Czech Republic (Soukopová et al. 2016; Soukopová and Klimovský 2016). As the
expenses expended by municipalities on waste management have been exponentially
growing in the Czech Republic (Soukopová et al. 2016), the demand of municipalities
for efficient and effective solutions has been increasing. The increasing expenses of
waste management and waste disposal, as well as increased wage levels, require
measures that would enable the decrease of total expenses. IMC could enable cost
decreases, for example by utilizing the positive effects of economies of scale or
economies of density.
The paper is based on follow-up research inspired by Bel and Warner (2016),
who conducted a meta-analysis of 49 studies dealing with IMC. Several factors, such as
fiscal constraints, professional management, spatial and geographic factors, community
wealth, and economies of scale were analysed. The conclusions showed that financial
*** This is the authors` version of the paper. ***
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savings can be a motivation to cooperate. However, the cooperation effect is not yet
completely clear, nor is there a clear support for economies of scale in their analysis. In
fact, several other factors, in particular the organizational and spatial character, strongly
influence the motivation for collaboration. This provides a new opening for further
research.
In addition, previous research of IMC in the Czech Republic showed different
impacts of IMC on costs (see Table 1). The research outcomes provided by Soukopová
et al. (2016) show that IMC increases local waste management costs; the research by
Soukopová and Klimovský (2016) shows the opposite results regarding cost savings.
Based on the in-depth interviews with municipal representatives responsible for waste
management (Soukopová and Ficek 2015) and best practices research into the cost
effectiveness of municipal waste management conducted for the Ministry for the
Environment of the Czech Republic (Soukopová et al. 2014), it may be concluded that
these differences could be caused in particular by internal aspects of IMC, rather than
by the IMC itself.
In the present paper, the findings from relevant up-to-date research (Soukopová
and Ficek 2015; Soukopová and Klimovský 2016; Soukopová et al. 2014, 2016) have
been extended by an institutional approach and processed in a more complex manner,
while investigating the internal aspects of IMC in the South Moravian Region of the
Czech Republic. The aim of the paper is to determine which internal aspects of IMC
influence the cost efficiency of municipal waste management services, and how and to
what extent. The research questions are set as follows:
RQ1: To what extent are municipal waste management costs affected by IMC?
RQ2: Which aspects (factors) of IMC have a significant influence on waste
management costs?
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The paper is structured to present answers to these research questions. The first
part of the paper introduces the theoretical framework of the surveyed issue, followed
by empirical evidence on IMC in the South Moravian Region and its analysis. The next
section describes the local government and market structure. The results are provided,
interpreted, and discussed in the fourth part of the paper. Finally, we formulate
conclusions regarding the surveyed issue in accordance with the paper objective and
policy implications.
2. Concept of Internal Aspects of IMC
International empirical research has attempted to investigate whether and to what extent
IMC affects municipal waste collection costs. Since 2000, eleven multivariate empirical
studies have been published to provide a systematic analysis of the effect of IMC on
waste collection linear cost function. Table 1 shows the results of selected quantitative
studies addressing these issues over the past decade, including the variables used and
the main conclusions of the analyses.
[Table 1 near here]
Apart from Sørensen (2007) and Soukopová et al. (2016), the European studies
(see Table 1) confirm a positive effect of IMC on cost efficiency in relation to the
savings of municipal expenses on waste management. In these studies, the impact of
IMC as the only dummy variable was investigated. Most of these studies (Bel and
Costas 2006; Bel and Mur 2009; Bel et al. 2014; Dijkgraaf and Gradus 2013, 2014;
Gradus et al. 2016, Dijkgraaf et al. 2015; Zafra-Gómez et al. 2013) made use of Cobb-
Douglas cost functions, the variable cooperation as an institutional form of cost
delivery, and other non-institutional determinants of cost such as volume of service and
frequency of service. Due to this approach, internal factors and various forms of IMC
were not considered in the analyses, although their importance has been confirmed in a
*** This is the authors` version of the paper. ***
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number of studies (e.g. Feiock et al. 2009; Hefetz and Warner 2011; Hulst and van
Montfort 2011; Rodrigues et al. 2012, Warner 2006; Warner and Hefetz 2002).
Nevertheless, some of these internal factors would not be relevant to the cited research,
due to the different characteristics of IMC connected with solid waste services in the
areas studied.
This paper sets out to identify the internal factors that could determine IMC and
thus understand how their influence can be explained in the waste collection market in
the South Moravian Region of the Czech Republic. We start with a brief outline of the
concept of internal aspects of IMC to explain the variables used in this research, namely
the institutional arrangement of IMC, for-profit orientation, share of municipality
collection area in the total collection area of a waste collection company, ownership
shares of an intermunicipal waste collection company, representatives of municipalities
participating in the supervisory boards of a waste collection company,
independent/professional management of the intermunicipal waste collection company,
size of town/city over 10,000 inhabitants, and duration of service on the waste
collection market.
The importance of the institutional arrangement of IMC may be proven by the
considerable variety in institutional arrangements (see Hulst et al. 2009) that differ with
respect to their composition, scope, and degree of organizational integration (ibid). The
origin, function, and mode of operation of institutions in each country reflect the unique
circumstances of that country (Pryor 2012; Salamon and Sokolowski 2010). Since the
Czech Republic is one of the most fragmented European countries (such as Spain, Italy,
France, and Slovakia), IMC is widely used by the local Czech governments. In relation
to the legal conditions, there is no obligatory form of IMC in the Czech Republic. On
the other hand, the relevant legal provisions are sufficiently detailed, and, for instance,
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Act No. 248/1995 on Local Public Benefit Companies, as amended, can be considered a
specialized law aimed at one of the specific arrangements of IMC in the Czech
Republic. Hence, there is space to examine whether the legal arrangement and the
linkage to the formally institutionalized form could play a crucial role in terms of cost
effectiveness.
The institutionalisation in relation to municipally owned companies (see also
Voorn et al. 2017) is closely related to the other internal aspect to be investigated in this
paper, namely the for-profit-orientation of the waste collection market. Since the
1970s, neoclassical economists have been considering an apparent paradox: ‘the
presence of nonprofit organizations inside markets driven by the quest for profit’
(Laville et al. 2015). Economics literature has continued in the neoclassical tradition,
‘which examines the raison d'être of organizations in the market economy’ (ibid). These
organizations are chiefly explained in terms of their ability to address market failure
(Jegers 2008; Steinberg 2006). The limitations of this explanation are, however, widely
recognized (see Steinberg 2006). ‘[…] as a result, despite the booming research […] in
the last decades, an integrated theoretical vision of this institutional arrangement has
not yet evolved’ (Valentinov 2008). The most important factor of the institutionalist
vision of the integrative conceptual core is that it generates behavioural patterns that
cannot be imitated by profit-seeking behaviour. The for-profit-orientation can assume
many faces. It may involve an increasing market orientation and entrepreneurial
activism (Weerawardena et al. 2010) as well as growing innovativeness (Jaskyte 2004;
Weerawardena and Mort 2006). It may also generate an overly competitive stance as
well as an increased interest in outcomes targeted by public policies (Weerawardena et
al. 2010).
Following a seminal article by Ronald Coase (1937), which ‘highlighted that
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certain transaction costs can explain the formation of economic enterprises’ (Laville et
al. 2015), Oliver Williamson (1979) defined an organization as a ‘governance structure’
that enables the reduction of transaction costs. The new institutional economics, as
introduced by Coase and further developed by later authors including Williamson,
‘confers to the organization a theoretical status that was not previously recognized by
orthodox economic science’ (Laville et al. 2015). For example, the main hypothesis of
transaction cost economics asserts that transactions are aligned with governance
structures in a transaction cost-economizing way. This hypothesis serves as a basis for
explaining the importance of focusing on the share of the municipality collection area
in the total collection area of a waste collection company in terms of costs
effectiveness. The minimization of transaction costs thereby serves as a criterion of
efficiency in the appraisal of governance structures. The use of efficiency criteria
implies that there is an efficiency maximum and that the competitive pressures of the
market facilitate achieving that maximum, even though it might remain unattainable due
to transaction costs and related reasons (see also Demsetz 1969). Transaction cost were
widely applied in analyses of IMC (Brown and Potoski 2003; Hefetz et al. 2012;
Lamothe et al. 2008; Shresta and Feiock 2011). As empirically proven, IMC can
decrease transaction costs more than privatization because collaborating municipalities
have similar goals (Brown 2008; Hefetz et al. 2014). As Bel and Warner (2015)
observe, low transaction costs are a precondition for IMC efficiency in providing
services. Collaborating municipalities can also share their coordination and transaction
costs (Bel et al. 2013).
One major practical issue remains open in the Czech Republic and other post-
Communist economies – nonprofit governance, which is closely related to internal
aspects of IMC such as ownership shares of an intermunicipal waste collection
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company, representatives of municipalities participating in the supervisory boards of
a waste collection company, and independent/professional management of the
intermunicipal waste collection company. Improving governance would mean reducing
opportunistic behaviour in a broad range of forms. Following Hansmann (1980), we
define a not-for-profit organization as one that is precluded, by external regulation or by
its own governance structure, from distributing its financial surplus to those who control
the use of organizational assets. ‘Managerial boards have some ownership rights, such
as the right to direct the use of resources, but not others, such as the rights to profit
from that use of resources and to sell these rights to others for a profit’ (Ben-Ner and
Jones 1995). Hansmann’s definition has the further virtue of defining an organizational
type by the structure of its control rights rather than by a possibly inaccurate self-
statement of purpose. Hansmann’s conceptualization supposes that the non-distribution
constraint functions as a tool against opportunism. However, Hansmann was only
partially right: the affected organizations have nonprofit status, but their non-
distribution constraint does not prevent opportunism. Better regulation, better self-
regulation, and better governance are all needed to ensure that these behaviours are
weakened or dampened. Determining how and to what extent the internal aspect serves
to achieve this goal, and hence cost effectiveness in a broader sense, is the object of our
research.
Regarding professional management, our assumption is based on the study by
Voorn et al. (2017) and their systematic review of the efficiency and effectiveness of
municipally owned corporations. ‘Relational ties between the MOC’s executive board
and the public actor are not always properly defined. […] Because of information
asymmetries and transaction costs, MOCs may have a higher initial failure rate […]
(and) less contract-management capacity.’ (ibid)
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Furthermore, while investigating the internal aspects, we also focus on the size
of town/city (over 10,000 inhabitants). The locality selection is one of the most
important decisions any kind of organization needs to make. The used variable is not
based on the locality selection; it shows the power of one of the IMC partnering
municipalities.
3. Material and Methods
3.1. Local Government and Market Structure in the Czech Republic, the South
Moravian Region
The Czech Republic has one of the highest territorial fragmentations of municipalities
in Europe. There is quite a large number of small municipalities with fewer than 500
inhabitants (more than 55% of all municipalities) and municipalities with between 501
and 1,000 inhabitants (more than 20% of all municipalities) in the Czech Republic.
Municipalities with more than 1,000 inhabitants form more than 20% of all
municipalities (see Table 2). Moreover, municipalities with more than 10,000 form
about 2% of all Czech municipalities; there are only 21 cities with more than 50,000
inhabitants and 5 with more than 100,000 inhabitants.
[Table 2 near here]
The South Moravian Region is one of 13 administrative units in the Czech
Republic (except Prague). It is located in the south-western part of the Czech Republic.
Its capital is Brno, the second largest city in the Czech Republic. The region has
1,175,000 inhabitants. With a total area of 7,196.5 km2 it is the fourth largest region of
the Czech Republic.
From Table 2, it is clear that the South Moravian Region has a larger share of
municipalities with between 501 and 1,000 inhabitants than the Czech Republic as a
whole. This fact is based in historical roots and different administrative structures. The
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region is divided into 7 districts; there are a total of 673 municipalities, of which 49
have the status of towns, with ten of the towns having more than 10,000 inhabitants (see
also Table 2).
3.1.1 The Solid Waste Market Structure
The municipalities in the Czech Republic have a legal obligation to provide waste
collection infrastructure for municipal waste. Under Act No. 185/2001 Coll., on Waste,
municipalities have obligations stipulated for waste producers, and the Act on Waste in
connection with Act No. 128/2000 Coll., on Municipalities (The Municipal Order)
concurrently enables municipalities to stipulate by means of a generally binding decree
the system of waste collection, transport, separation, utilization, and disposal of
municipal waste generated in their cadastral area, including the system of building
rubble disposal.
In 2014, the waste management services cost 9.66 billion CZK (ca. 362.4
million EUR), about 3.1% of total municipal expenditures. Municipalities may charge
their citizens a refuse collection charge up to a maximum of 100% of the costs. Between
2012 and 2014, on average, 77% of the costs were charged under this user fee. The rest
of the costs were funded by other income (local taxes and central government
subsidies).
Municipalities are free to choose whether to provide waste management services
by themselves (in-house or in cooperation with other municipalities), or to contract out
the waste collection to outside firms (public or private). Municipalities choose the way
the public utility services are provided based on their size in terms of number of
inhabitants and land area, with consideration given to their budget constraints.
In 2014, 27 waste collection companies operated in the South Moravian Region;
336 municipalities contracted out waste collection to private firms, 59 to public firms,
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and 57 to mixed firms (Public-Private Partnership, PPPs). Another group of
municipalities (219) collected municipal waste through a public firm in IMC. The
remaining municipalities (2) collected the municipal waste themselves (in-house).
[Table 3 near here]
In the Czech Republic, contracting out refuse collection is not compulsory.
However, municipalities have a legal obligation to use competitive tendering when
contracting out any public service. Nevertheless, these attempts can be weakened by
market concentration and unfair competition (in 2012, the Czech Office for the
Protection of Competition confirmed strong distortions of the competitive environment
in the Czech waste market)1.
The value of the Herfindahl-Hirschman index (HHI) – based on the sum of the
squared market shares – is 0.1535, which indicates a waste collection market with a
slight concentration in the South Moravian Region. Twenty-seven waste collection
companies operate there: nine public, eight private, four PPPs, and six public in IMC.
Figure 1 clearly shows that some municipalities are located within larger territories with
common contract partners, while some are located on the border between two or more
collection companies’ areas.
[Figure 1 near here]
Six waste collection companies (underlined items in Figure 1) were established
by cooperating municipalities and operate in the South Moravian Region in the long
term (see Table 4). Three intermunicipal waste collection companies (RESPONO,
EKOR, and HANTÁLY) operate on large and consistent territories (see Figure 1). All
of these companies are municipally owned corporations (MOCs).
[Table 4 near here]
Different kinds of IMC are extensively used in the South Moravian Region. Four
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out of a possible eight legal forms that are allowed by national legislation in the Czech
Republic (Appendix 1) are also used in the field of waste management; in the South
Moravian Region, only two of these forms are used. More than 30% of municipalities
(194) are served by a supplier under one of the two forms of IMC: an agreement
concluded among municipalities or a voluntary association of municipalities (VAM)
(see Table 4).
3.2. Data and Model
The research was performed for the three-year period from 2012 to 2014. We used the
Linked Open Data on municipal populations from the Czech Statistical Office (CZSO),
and the Linked Open Data on municipal solid waste expenditures (MSWE) from
MONITOR, the specialized information portal of the Ministry of Finance of the Czech
Republic. The data related to internal aspects of IMC were obtained for 2014 via a
questionnaire-based survey. The survey was carried out from September 2015 till the
end of January 2016 and the data were collected for the period between 2012 and 2014.
It was necessary to clean the data in order to achieve the standard data
distribution. This was obtained after the data had been cleaned by 2% (1% at each side).
The basic data set contained 658 municipalities and 205 cooperating municipalities after
sample cleaning.
A statistical analysis of the data (using basic descriptive statistics in relation to
the studied factors) was performed. Subsequently, in order for it to be possible to
compare the results of the research with foreign parametric (econometric) studies (for
example Bel and Costas 2006; Bel and Mur 2009; Dijkgraaf and Gradus 2013),
regression analysis was used. The basic function of municipal waste management
expenditure, in relation to the manner of ensuring and the form of providing waste
management services and other factors, takes the following form:
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𝑇𝐶𝑝𝑐 = 𝑓(𝐼𝑛𝑠𝑡, 𝑆ℎ𝑎𝑟𝑒, 𝐼𝑚𝑝10, 𝐴𝑟𝑒𝑎, 𝑀𝑎𝑛, 𝑃𝑟𝑜𝑓, 𝑃𝑟𝑜𝑓𝑖𝑡, 𝑃𝑒𝑟𝑖𝑜𝑑) (1)
The dependent variable, TCpc, is the total municipal waste management costs
per capita in the municipalities of the South Moravian Region in the Czech Republic. It
includes collection, transportation, disposal or treatment, and other waste management
services. The total costs incurred by the municipality are determined by the population
of the municipality (therefore we study the expenses per population) and the variables
influencing the expenses, which are as follows:
(1) Inst is the dummy variable representing the institutional arrangement of IMC. It
acquires a value of 1 when it is a voluntary union of municipalities cooperating
in the area of waste management, and a value of 0 when the municipalities
cooperate without an institutional background. As a result of Czech law (Act
No. 128/2000 on Municipalities as amended), the voluntary unions of
municipalities have more legislative power and competence than municipalities
that cooperate only on a contract basis, which shows the importance of focusing
on the institutionalization of IMC.
(2) The hypothesis concerning this variable is that there is a negative correlation.
We proceed from the assumption presented by Feiock (2007) that was also
confirmed by Bel and Warner (2015) and Hulst and van Montfort (2012). This
variable will also be studied in the follow-up research, in particular in
connection with the assumptions and conclusions of Elinor Ostrom, who
concluded that a functional institution with common interests, needs, and
resources operates better.
(3) Share is the variable representing the ownership share of an intermunicipal
waste collection company. The hypothesis regarding this variable is that there is
a negative correlation which is based on the results obtained from in-depth
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interviews with municipal representatives (Soukopová and Ficek 2015). We
suppose that the larger the ownership share, the bigger the influence over the
aims and direction of the intermunicipal waste collection company and that this
will be followed by efforts to influence cost savings.
(4) Size10 is the dummy variable that acquires a value of 1 when in a waste
collection company there is a municipality with a population greater than 10,000
inhabitants; otherwise it acquires a value of 0. The hypothesis concerning this
variable is that there is an ambiguous correlation.
(5) Area is the variable representing the share of the collection area of a
municipality of the total collection area of a waste collection company. The
hypothesis of this variable is that there is a negative correlation. We suppose that
a larger area share allows a larger share of economies of scale and a possibility
to gain cost savings.
(6) Man is the dummy variable that acquires a value of 1 when municipal
representatives participate in the supervisory boards of a waste collection
company; otherwise, it acquires a value of 0. The hypothesis for this variable is
that there is a negative correlation. We proceed from a study analysing the best
practices in the area of municipal waste management (Soukopová et al. 2014), in
which the factor of municipalities’ representatives in the supervisory board of a
waste collection company was unequivocally a positive factor in terms of
savings of municipality costs.
(7) Prof is the dummy variable representing the independent/professional
management of the intermunicipal waste collection company. It means that the
waste collection company is led by independent professional/s (as the sole
director or as member/s of the board of directors). This variable acquires a value
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of 1 with independent management of the waste collection company, and a value
of 0 otherwise. The hypothesis regarding this variable is ambiguous. On the one
hand, professional managers try to increase their benefits (they receive a share of
the profit of the company) and therefore, their interests may not reflect the
interests of municipalities (owners) on transforming the economies of scale to
lower prices for the owners (municipalities). On the other hand, a number of
management theories and some of the conclusions of the New Public
Management show that an independent professional (manager) is more efficient
in managing public corporations.
(8) Profit is the dummy variable that acquires a value of 1 when the intermunicipal
waste collection company generated a profit in the examined year (for-profit
behaviour), and 0 otherwise. The hypothesis for this variable is that there is a
positive correlation, which is based on the results obtained from the deep
interviews with municipal representatives (Soukopová and Ficek 2015).
(9) Period is the variable representing the duration of service on the waste
collection market. The hypothesis for this variable is ambiguous as shown by the
best practices research into the cost effectiveness of municipal waste
management that was conducted for the Ministry for the Environment of the
Czech Republic (Soukopová et al. 2014).
The analysis, which involved both exploratory data analysis and multiple regression
analysis, was conducted at the municipality level using data for the year 2014.
In order to determine the influence of the municipality size, the municipalities
were divided into three size categories identified hereinafter as follows: municipalities
with up to 500 inhabitants (Sample_A, n = 61); municipalities with 501 to 1,000
inhabitants (Sample_B, n = 71); municipalities with more than 1,000 inhabitants
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(Sample_C, n = 73).
Table 5 shows the descriptive statistics of individual variables for the whole
sample. Appendix 2 contains the descriptive statistics for individual variables regarding
other research samples.
[Table 5 near here]
4. Results and Discussion
The results show that the costs per capita of cooperating municipalities are lower than
those of municipalities without IMC. Figure 2 shows the relation between average
municipal waste management expenditure per capita exerted by cooperating and non-
cooperating municipalities between the years 2012 and 2014. The difference is
noticeable in all three years and the municipalities with IMC show lower expenses per
capita. The municipalities without IMC show on average 11% higher expenses than
cooperating municipalities in the observed period.
[Figure 2 near here]
In terms of the influence of IMC on cost effectiveness, the results were expected
and correspond with the results from previously conducted studies (e.g. Bel and Mur
2009; Bel et al. 2013, 2014; Bel and Warner 2015; Gradus et al. 2014; Hefetz et al.
2012, 2014; Soukopová and Klimovský 2016).
We provide a more complex approach, based on ordinary least-squares (OLS)
regression. This research proceeds from previous research papers, (cf. Bel and Costas
2006; Bel and Mur 2009; Dijkgraaf and Gradus 2013) extending them by using an
institutional approach.
Table 6 shows the results of the regression analysis (OLS model).
[Table 6 near here]
The results show that the municipal waste management costs are significantly
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influenced by the following variables: institutional arrangement of IMC, the influence
of municipalities with more than 10,000 inhabitants on the management of the
intermunicipal waste collection companies, participation in management of the waste
collection company, professional (independent) managers, and for-profit oriented waste
collection companies. The results differ in different samples of municipalities; only the
impact of institutional arrangement is significant in all groups of municipalities.
The coefficients for the variables of ownership share and municipal share on
collection area and period are not significant.
The results concerning the variable expressing the institutional arrangement of
IMC as a cost effectiveness factor in decreasing municipal waste management expenses
in all groups of municipalities are compelling. These results corroborate the conclusions
reached by Feiock (2007), according to whom stability among local agreements is
impeded by the requirement of heterogeneity among local government partners, and by
the fact that if their IMC is to address the issues concerning economies of scale, it is
necessary to develop the forms of governance that help to overcome differences among
partners. Feiock’s theory of institutionalized collective action builds on the foundations
of the work by 1990 Nobel Prize laureate Elinor Ostrom, who deals with political
institutions and the structure of political networks. Common interests, needs, and
resources, just like institutional homogeneity in budgetary rules or in the requirements
for a given service (Bel and Warner 2015), make collaboration easier. Bel and Warner
(2015) identify several key differences in the main characteristics of individual types of
cooperation regimes. For example, in terms of the degree of institutionalization,
individual forms of cooperation range from informal to formal institutionalized
arrangements, and these arrangements have differing impacts on the efficiency of the
provided public utility services and their costs. Our results confirm these assumptions,
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which may have a key impact on the decisions of local representatives.
The influence of the variable Size10 that represents the potential impact of cities
with populations over 10,000 inhabitants (relatively large in the Czech Republic, where
more than 85% of all municipalities have fewer than 500 inhabitants) is in accordance
with the questionnaire survey that indicated a positive correlation. The municipal
representatives drew attention to the negative effect of a municipality with a population
over 10,000 inhabitants (in relation to company operation and earning cost advantages
without taking the needs of small municipalities into account). On the other hand, the
result for this variable is significant only in the whole sample. The effect of this variable
was not proven in individual samples according to municipality size. These results
reduce the explanatory power of this variable.
The results of the variable Man, which represents participation of municipal
representatives in the supervisory board of a waste collection company, showing
potential cost savings for participating municipalities, correspond with the results of
Voorn et al. (2017). These results show a significant negative correlation in the whole
sample as well as in the sample of municipalities with populations between 501 and
1,000 inhabitants. The effect of this variable is not significant in other samples
(municipalities with populations under 500 inhabitants and municipalities with more
than 1,000 inhabitants). In addition, the results regarding the group of municipalities
with more than 1,000 inhabitants show a positive correlation but lack statistical
significance. These results reduce the explanatory power of this variable, but results
regarding the group of municipalities with populations between 501 and 1,000
inhabitants are compelling.
The results for the variable Prof, representing independent/professional
management of a waste collection company, are surprising in relation to individual
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groups of municipalities. In the whole sample, the results correspond with the New
Public Management theory; however, this effect is confirmed only in the group of
municipalities with a population between 500 and 1,000 inhabitants. The positive
correlation between this variable and the costs for municipalities with populations over
1,000 inhabitants is surprising.
The result for the variable Profit, representing the for-profit orientation of a
waste collection company is significant only for the whole sample, where its effect is
negative (raising municipal costs). This effect has not been confirmed in other samples
of municipalities; on the contrary, in the sample of municipalities with populations
above 1,000 inhabitants it may reduce municipal costs, although statistically
insignificantly.
5. Conclusion
The paper analyses determinants of costs differences in waste collection and provides a
clear explanation of their influence on the costs in the waste collection market in the
South Moravian Region of the Czech Republic. The results are based on ordinary least-
squares regression conducted on a basic data set containing 660 municipalities and 205
cooperating municipalities (after sample cleaning).
In addressing RQ1, we focused on how (and to what extent) the municipal waste
management costs are affected by IMC. The Czech Republic has one of the highest
territorial fragmentations of municipalities in Europe. The results show that the costs
per capita of cooperating municipalities are lower than those of municipalities without
IMC. The municipalities without IMC show, on average, 11% higher expenses than
cooperating municipalities in the observed period. We could prove that the crucial role
in cost reduction is played by internal factors that have so far been only marginally
investigated.
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In addressing RQ2, we explored which internal aspects (factors) of IMC have a
significant influence on waste management costs. The results showed that cost
reduction is significantly influenced by the institutional arrangement of IMC, the
participation of municipal representatives in management, and professional managers.
The increase in costs is related to municipality sizes larger than 10,000 inhabitants and
to the for-profit oriented behaviour of waste collection companies. The coefficients for
the variables of ownership share, municipal share of collection area, and period are not
significant.
The policy implications of the research could involve pointing out the
importance of the internal factors of IMC and offering a new and innovative solution to
the decision-making process of municipal representatives along with opening a space
for further scientific research on the topic from an international perspective.
Acknowledgements: This work was supported by the Czech Science Foundation under Grant
No. GA17-15887S ‘Identifying key factors of successful intermunicipal cooperation.’
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Notes
1. The Office for the Protection of Competition (Antitrust Office) imposed a fine amounting
to CZK 96.579 million (approximately € 3,825,000) on four large companies. These
companies entered into prohibited agreements on market sharing that led to the distortion
of competition (UOHS, 2012). They shared their customers through mutual contacts and
information sharing, particularly by coordinating their bids for public tenders for waste
disposal between 2007 and 2011. The Office gathered evidence showing that the
companies had maintained business contacts that gradually turned into the anticompetitive
coordination of their actions towards customers. This took place especially in the
submission of fake bids in awarding procedures in order to create an impression that there
was a strong competition among bidders.
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