Economies of scale in local public services: the case of British crematoria

Knapp, Martín

doi:10.1080/00036848200000040

Cited by 8 publications

(5 citation statements)

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“…Within this cost function, the effects of institutional differences between locally and nationally operated laboratories are also analyzed. The ordinary least squares empirical model used in this article follows a similar framework from Knapp (1982), who estimates the economies of scale in British crematoria and who found a cost function, which as expected, is quadratic in output, tracing out a statistically significant U-shape. It is assumed that an output in forensic science laboratories is exogenously determined through crime, and any other factors that affect cost are also assumed to be exogenous if not included in the model.…”

Section: Empirical Strategymentioning

confidence: 82%

National versus Local Production

McAndrew

2017

Public Finance Review

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Public finance and public choice economists have contrasting views on the determinants of public sector size. This article makes a unique contribution to this literature by exploring an integer count of output, rather than the commonly used dollar approximation of output, using data that are homogeneous across the levels of government, where a unit of observation is not a governing body, but rather a service provider. Specifically, this article explores the counteracting effects of fiscal federalism and economies of scale using data from the National Institute of Justice with an application of data envelopment analysis and stochastic frontier analysis. I determine that provision of forensic science services at the national level rather than local level does not lead to higher relative cost, and national production may be relatively more efficient. In general, however, neither locally nor nationally operated laboratories are operating at an efficient scale, a potential argument for privatization, insourcing, or outsourcing.

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Section: Empirical Strategymentioning

confidence: 82%

National versus Local Production

McAndrew

2017

Public Finance Review

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“…The empirical literature on economies of scale in local public service delivery has seen three somewhat overlapping but otherwise well-differentiated stages in the modeling of the cost functions of the production process. Early works in this area used a linear function, quadratic in the measure of output, to establish the existence of U-shaped cost curves (Bodkin & Conklin, 1971;Hirsch 1959Hirsch , 1965Knapp, 1982;Kumar, 1983; among others). The reporting standards of the early contributions are arguably weaker than those of more recent works.…”

Section: Modeling Framework For the Cost Functionmentioning

confidence: 99%

Evidence on economies of scale in local public service provision: A meta‐analysis

Gómez-Reino

Peñas

Martínez-Vázquez

2023

Journal of Regional Science

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The standard theory of optimal jurisdictional size hinges on the existence of economies of scale in the provision of local public goods and services. However, despite its relevance for forced local amalgamation programs and related policies, the empirical evidence on the existence of such economies of scale remains elusive. The main goal of this paper is to produce an updated and comprehensive quantitative review of the existence of economies of scale in the provision of local public goods using a meta‐analysis approach to systematize the wide range of empirical approaches and modeling frameworks found in the previous literature. Our analysis confirms the presence of moderately increasing to constant returns to scale in the provision of local services with no reduction in the average costs of production in the delivery of most local public services beyond a certain, modest jurisdictional size, which many studies have estimated at 10,000 residents. Also, the potential for economies of scale differs at least across three traditional services: education, water and sanitation, and garbage collection, being highest for education and lowest for garbage collection. Our analysis also offers guidelines for future empirical research in this area. Physical output and production cost data should be used, together with translog specifications for the modeling of cost functions. Last, we find evidence that the determinants of output cost elasticity include bidirectional publication bias and population density but do not include the presence or absence of modern “lean” production technologies or the (perceived) capital intensity of the sector, contrary to conventional wisdom. These findings have significant policy implications for countries considering jurisdictional consolidation programs.

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“…Duncombe et al (1995) also found asymmetric relationships between school size and expenditures. Several studies have fitted quadratic functions to the cost structure of local public services: Hirsch (1965) for refuse collections, Knapp (1982) for crematoria, and Tao and Yuan (2005) for public elementary schools. Furthermore, in relation to other aspects of cost structures, Ladd (1994) and Nelson (1992) investigated the relationship between population growth and counties' expenditures.…”

Section: Methodsmentioning

confidence: 99%