Abstract
We explore the difference in cost structure when municipalities participate in intermunicipal cooperation (IMC) and estimate the minimal efficient scale, which minimizes the per capita service provision cost. The unit of analysis is designated as waste treatment provision area. We specify a cost function based on the Cobb–Douglas form that considers local environment variables, and illustrate the disparity between the current population and minimal efficient scale of the public service provision area. There are several key findings. First, being in an IMC affects the cost function by generating transaction costs, such as monitoring the quality of service provision, but the costs are discounted by population size. Second, the cost function is not linear to population, a downward convex function. Third, approximately 90% of the service provision areas in Japan have the opportunity to take advantage of economies of scale. However, geographical constraints render waste treatment with the framework of IMC more difficult, since such areas are separated by natural elements such as mountains. Nevertheless, the model in this study implies the possibility that municipalities can efficiently reduce public spending by participating in IMC authorities.
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Notes
Since the population is centered and the average logged population is 11.0233, the value in case \(\frac{{\partial \ln c_{i} }}{{\partial {\text{Coop}}_{i} }} = 0\) is \(\exp \left( {\frac{0.197}{0.089} + 11.0233} \right) \cong 560 ,633\).
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Acknowledgements
This work was supported by JSPS KAKENHI Grant Numbers 17K18919 and 18J11698. We are grateful to participants at the International Conference on Spatial Analysis and Modelling 2018 in Tokyo for their helpful comments.
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Appendix
Appendix
Based on the results in the analyses, it is possible to derive an estimation of the counterfactual cost reduction effect of being part of an IMC. Assuming that no municipalities are affiliated with IMC authorities, we calculated the differences in waste treatment spending between the actual and counterfactual settings. Utilizing the estimated coefficients retrieved from model III in Table 2, the values of local environment factors changed, because the IMC boundaries were delineated into municipal boundaries. Consequently, additional spending (i.e., the difference between actual and assumed spending), assuming that no municipalities are affiliated with IMC authorities, was computed as approximately 1380.96 billion yen, 1.81 times higher than actual spending. A comparison between actual and predicted spending in the counterfactual setting is illustrated in Fig. 5. Most predicted values are above the actual ones. Possibly, most municipalities are below their MESs and the shifted MESs in the counterfactual setting have smaller population sizes than those in the original ones. Since this prediction assumes that all municipalities have to deal with their waste treatment services on their own, it is an exaggerated case. Nevertheless, this estimation highlights how IMC helps reduce spending on waste treatment.
Comparison of actual and predicted spending in the counterfactual setting
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Baba, H., Asami, Y. Estimating the minimal efficient scale and the effect of intermunicipal cooperation on service provision areas for waste treatment in Japan. Asia-Pac J Reg Sci 4, 139–158 (2020). https://doi.org/10.1007/s41685-019-00119-6
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DOI: https://doi.org/10.1007/s41685-019-00119-6