ABSTRACT
This chapter makes a contribution to the political economy literature by analysing whether and how consumers hold municipal incumbents responsible for residual municipal solid waste (MSW) pricing policies. The political economy literature proposes several theories in relation to the information taken into account by the electorate when judging incumbents’ performance. We model and test empirically the three most common scenarios. In the first scenario the basic consumer choice problem is based on the models introduced in the seminal works of Kinnaman and Fullerton (2000) and Fullerton and Kinnaman (1995). The representative consumer maximizes its utility subject to its waste balance equation and its budget constraint, but ignores the budget constraint faced by local policymakers when deciding residual MSW prices. In this setting, consumers’ utility decreases as residual MSW prices increase. Based on the median voter literature (Downs 1957), the second scenario assumes that consumers concede that municipalities need to finance the cost of waste processing and disposal services, but also understand that lump sum transfers within the municipality can play a role. The resulting model specification shows that utility maximizing residual MSW prices depend on the consumer’s relative level of MSW generation. If the consumer produces less (more) residual MSW than the average residual MSW production in his municipality, utility increases (decreases) as the price increases. In the third scenario we assume that consumers compare the MSW price in their municipality with the price charged in neighbouring municipalities, and use the latter as a yardstick to measure incumbents’ performance. Consumers (voters) will adopt this method to judge whether the residual MSW price in their municipality is acceptable, if they lack information (Besley and Case 1995).
