Spatial heterogeneity, efficiency and regulation in waste services: evidence from Italian regions

This paper proposes an empirical strategy to measure the efficiency of local governments in organising waste services when unobserved spatial heterogeneity in production technology exists. The proposed strategy employed the SkaterF procedure for identifying spatial regimes – groups of adjacent local governments with homogeneous production technology – and the quantile regression for estimating a production function per regime (local production functions), which is used for efficiency measurements. An application for data from 926 Italian municipalities (2017–2020) is also presented. Results highlight that neglecting unobserved spatial heterogeneity in production technology (i.e., measuring efficiency with a global production function) leads to misguided regulatory interventions.