Privatisation of waste collection services in response to fiscal stress in times of crisis

Abstract

According to the conventional theoretical framework, fiscal stress is an explanatory factor of privatisation, since the latter can provide economies of scale and cost savings, as indicated by the theory of public choice. However, urban planning theories suggest that public choice does not take into account the collective needs of those receiving public services. The present study aims to clarify two major issues. Firstly, in the presence of fiscal stress, do public managers really privatise? And secondly, does privatisation harm the public interest? To investigate these questions, we constructed and analysed a discrete-time survival model, which was applied to the period 2000–2010, to reflect the effects of the current global financial crisis on the fiscal stress–privatisation relationship with respect to urban waste collection services. The results obtained indicate that when certain aspects of financial condition worsen, the likelihood of public services being privatised increases. This was the case during the Great Recession of 2008–2010, especially when a neighbouring municipality had previously privatised its services. After privatisation, service quality did not vary significantly, and so we conclude that public choice does not prejudice the public interest.