CONTRACTING-OUT OF HOUSEHOLD WASTE COLLECTION SERVICES IN JAPAN

We first report three empirical findings from our survey on the contracting-out of municipal waste collection services in Japan: (1) the rate of contracting-out and the contract price are inversely related, (2) this inverse relationship tapers out as the contracting rate becomes sufficiently high, and the contract price even tends to go up as the contracting rate approaches 100% and (3) there is a significant disparity in the contracting rates between the eastern and western parts of Japan. In order to account for these observations, we then set up a simple analytical model and examine its implications. Also, we discuss the issues that a potential hold-up situation could give rise to when the services are completely contracted out to private firms.