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Economies of Scale and Scope: A Cost Analysis of Municipal Solid Waste Services

The economics literature in municipal solid waste (MSW) markets is concerned primarily with demand-side issues and the associated policy implications. Few have studied the cost structure of this market, and none model the multiple product nature of MSW services. We argue that the production of MSW services has two major component–disposal and recycling, and that cost complementarities between the two activities may exist. Hence, we specify a multiple output cost structure, which models the relationship between recycling and disposal activity and investigates the extent of product-specific scale economies and overall scope economies in this market. (JEL R51, Q24)