Assessing the effects of contracting out services on cost in managing municipal solid waste in South Korea

For the past several decades, municipal solid waste (MSW) management has been a popular area for contracting out by local governments. However, whether contracting out waste management services saves cost is still under debate. Such mixed results warrant research on the cost effects of contracting out waste services. Heretofore, extant studies tended to use cross-sectional data for empirical analysis and the total cost of MSW services by each service provider as a measure of cost rather than the MSW management budget. Departing from past studies, the current study uses time-series cross-sectional (TSCS) data of 25 local governments under the jurisdiction of Seoul Metropolitan City in South Korea from 2005 to 2017 for analysis. This study tests the effects of the contracting out cost-to-budget ratio and waste treatment by private sector ratio on the MSW management budget per capita over time. The findings reveal that more contracting out results in more spending in the MSW budget per capita rather than cost savings. The findings also show that the proportion of MSW treatment by the private sector does not have any meaningful impact on the MSW budget per capita. Overall, within the scope of the current study, contracting out waste services does not save cost.