Introducing and enhancing competition to improve delivery of local services of solid waste collection

Over the last two decades, Barcelona has implemented a far-reaching reform of the city's solid waste collection. In 2000, the city was divided in 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 study analyzes and evaluates the creation of lots as a tool of competition with monthly observations of costs and outputs between 2015 and 2019. Main findings are that firms producing in larger zones report higher costs, that increased competition was not sufficient to lead to converging costs, and that none of the firms operate under increasing returns to scale. Based on our results, we recommend creating an additional zone. We further suggest 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.