How Local Governments Structure Contracts with Private Firms: Economic Theory and Evidence on Solid Waste and Recycling Contracts

Margaret Walls

RFF Working Paper Series from Resources for the Future

Abstract: Solid waste management services are contracted out to private firms in many U.S. communities. Household waste collection, transport, and disposal are relatively straightforward services to define within the terms of a contract. The addition of recycling, however, significantly complicates matters. How should contracts be structured to provide incentives for recycling? Who should own key facilities, such as recyclable materials processing facilities? Should a separate contract for processing and sale of materials be used, or should these services be provided by government employees or purely private markets? These questions are addressed in this study using the principal-agent framework and the theory of incomplete contracts in economics. I explain stylized facts in the industry, including facts about asset ownership, and look in detail at contracts used in seven communities that have achieved high rates of waste diversion and recycling.

Keywords: incentive contracts; asset specificity; principal-agent models; waste collection; recycling (search for similar items in EconPapers)
JEL-codes: L14 L33 Q2 (search for similar items in EconPapers)
Date: 2003-12-01
New Economics Papers: this item is included in nep-env
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Citations: View citations in EconPapers (5)

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Working Paper: How Local Governments Structure Contracts with Private Firms: Economic Theory and Evidence on Solid Waste and Recycling Contracts (2003)
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