The Relationships Between Costs and User Charges: The Case of a Norwegian Utility Service

Lars-Erik Borge and Jorn Rattso

No CESifo Working Paper No. 1033, CESifo Working Paper Series from CESifo Group Munich

Abstract: The paper investigates the relationships between costs and user charges in the sewage industry in Norwegian local governments. The purpose of the analysis is to answer the following questions: (i) To what extent is a higher unit cost passed on to consumers in terms of a higher user charge? (ii) Does user charge financing lead to higher or lower unit cost? The econometric analysis indicates that around 40 per cent of a cost increase is passed on to consumers in terms of higher user charge. Moreover, user charge financing has a significant negative effect on the unit cost. An increase in the degree of user charge financing by 10 per cent-points is predicted to reduce the unit cost by 5-8 per cent.

Keywords: cost control; user charges; sponsor-bureau model; utility service (search for similar items in EconPapers)
JEL-codes: D73 H71 H72 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene
Date: 2003
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