Co-Production in Local Public Service Delivery: The Case of Waste Management

In a simple model of waste management, we analyse the basic aspects of co-production in local public service delivery. Our results suggest that citizen involvement may lead to an expansion of the production possibility frontier, if waste sorting is made sufficiently convenient, relative to work, through an appropriate tax policy. However, by diverting time away from work, this policy may trigger a tax base erosion phenomenon. We find that the incentive power of the tax should be high (low) when local preferences for the service are very high (low) relative to local incomes. In the intermediate situation, two cases arise. First, when preferences are (not very) low relative to incomes, taxation should pursue resource collection purposes and be deprived of its incentive effects. Second, when preferences are middle-to-high relative to incomes, the trade-off between incentive provision and tax base erosion causes the optimal tax rate to first increase, then decrease.