The Relationships between Costs and User Charges: The Case of a Norwegian Utility Service

Governments struggle with rising service spending, and user charges represent a possible incentive mechanism to control costs. This paper investigates the relationships between costs and user charges in the sewage industry in Norwegian local governments. The analysis addresses the following question...

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Veröffentlicht in:Finanzarchiv 2005-01, Vol.61 (1), p.98-119
Hauptverfasser: Borge, Lars-Erik, Rattsø, Jørn
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description Governments struggle with rising service spending, and user charges represent a possible incentive mechanism to control costs. This paper investigates the relationships between costs and user charges in the sewage industry in Norwegian local governments. The analysis addresses the following questions: (i) To what extent are increased costs passed on to consumers in higher user charges? (ii) Does user-charge financing lead to higher or lower unit cost? The econometric analysis indicates that 30-40% of a cost increase is passed on to consumers in higher user charges. Moreover, user-charge financing has a significant negative effect on the unit cost. An increase in user-charge financing by 10 percentage points is predicted to reduce the unit cost by up to 10%.
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subjects Cost efficiency
Cost estimates
Costs
Econometrics
Economic analysis
Economic costs
Empirical research
Fees
Income taxes
Local government
Norway
Pricing
Principal-agent theory
Property taxes
Public assistance programs
Public economics
Public sector
Sanitation services
Unit costs
User costs
Utilities
title The Relationships between Costs and User Charges: The Case of a Norwegian Utility Service
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