Local economic development — the changing public/private sector relationship

The paper examines changing approaches to local economic development in the period since 1974. Initially, it proposes an ‘orthodox’ model of local economic development policies which emphasised the provision of a better industrial fabric, and of financial assistance to small, inner city firms. It suggests three recent directions of change in emphasis from this orthodox model: help in the creation of new entrepreneurs; replacement of public sector by private sector action; local authority shareholding in local firms by use of Enterprise Boards. Each approach makes different assumptions about the public/private sector relationship, the last two involve a more explicitly ideological stance on this issue.     

COORDINATION OF PUBLIC AND PRIVATE AC A CASE STUDY OF LAKE RESTORATION1

ABSTRACT: The potential for joint public and private action for lake restoration is examined using Lake Apopka, Florida, as a case study. Initial calculations indicate that private incentives alone are inadequate to attract investment in a facility to grow and harvest water hyacinths for conversion to methane gas. However, the private externality of water quality improvement associated with harvesting water hyacinths provides a key linkage between the public's water quality objectives and the private gas producer's actions. In order to establish the potential basis for negotiation, the public's willingness-to-pay for environmental services associated with improved water quality is estimated and compared with the estimated subsidy required to induce private action. A conceptual framework is then presented for coordinating actions between private firms and public water management agencies in order to internalize the private externality of water quality improvement while simultaneously achieving the public and private objectives. Results indicate that the subsidization of water hyacinth production and harvesting compares favorably with alternative means of enhancing the water quality of Lake Apopka.     

Regulation and private participation in the water and sanitation sector

Private-sector participation is widely perceived to be the solution to the failure of many publicly owned and managed water utilities to operate efficiently and make the investments required to meet community needs. However, there are no guarantees that privatisation will actually yield the desired performance improvements. Simply converting a public-sector monopoly into a private one provides no competitive incentives for the utility to operate efficiently, make appropriate investments or respond to consumer demands. Likewise, privatisation per se need do little to improve sector performance if governments are unwilling or unable to tackle such underlying problems as overmanning, uneconomic water pricing policies, financing the provision of public and merit goods, and restricting over-intrusive political intervention.
Given the characteristics of the water and sanitation sector it is inevitable that some form of continued public regulation of the private companies will be necessary. The regulatory burden can be reduced by adopting a competitive form of privatisation, choosing a more competitive sector structure and devising an appropriate regulatory regime. However, it has to be recognised that there will be a trade-off between making a venture attractive to private firms and introducing a notionally 'ideal' regulatory system. Regulation, in practice, is as much about creating the conditions under which private firms can operate effectively and efficiently as it is about protecting specific customer and public interests.     

OWNERSHIP AND WATER SYSTEM OPERATION1

ABSTRACT: Two types of organizational systems provide most of the water service in the United States. The investor-owned firm operates on a profit basis generally subject to state commission regulation. The government-owned firm is generally confronted by local control. The comparative efficiency of private versus government firm provision of water services is essentially an empirical issue. Unit costs and other operating statistics are examined for water firms of each ownership form. The analysis shows that private firms tend to have higher operation costs than do government firms, possibly attributable to wage-salary differentials. The analysis also indicates that capital investment in large government firms may result in diseconomies. The analysis creates serious doubt as to whether efficient provision of water services can be better facilitated by large mergers of either ownership form.     

Market efficiency,filter rules and buffer stock profitability

This paper uses a model of the optimum buffer stock as a ‘filter rule’ together with a financial model that can be used to assess the efficiency of international commodity markets. The approach is simpler to apply than many other methods which have hitherto been used and yields an economy in theoretical and computational effort. The arguments are applied as a case study to the international copper market. The main conclusion is that private storage is not under-provided for and that a public buffer stock agency would be unlikely to be self-financing.     

The small-scale water provider in Paraguay: bringing private sector efficiency to water resource use and the provision of drinking water to the poor

This article provides a case study of small-scale private sector provision of water supply in Paraguay, where the Government has sought sector policy reforms that would encourage private investment in drinking water supply. Ironically, while the Government has focused almost entirely on garnering the interest of large private international water companies, much smaller local firms have already made significant investments in drinking water services for the poor, all without any participation or encouragement from the Government. Outside Paraguay's two major cities, Asunción and Ciudad del Este, large numbers of aguateros currently provide piped potable water to lower-income people. Though the aguateros have little legal footing — they are in many respects informal and unregulated —they have constructed as much as one third of all the new drinking water connections in these two cities over the past 20 years. The small-scale water systems in Paraguay offer a model of financial, economic, and water-use efficiency. This article asserts that an abundance of groundwater resources, cheap access to electricity for pumping, and a spirit of informal investment, among other variables, has spawned widespread use of this approach. This article documents and analyzes the features of these independent small-scale water providers in Paraguay and the efficiency they bring to the use of water resources in meeting drinking water demands among the poor. It also cautions against policies that may trample on such entrepreneurial spirit in the name of State-managed privatization.     

Assessment of public vs private MSW management: a case study

Public-private partnerships in urban environmental services have witnessed increased interest in recent years primarily to reform the weak performance of the public sector, reduce cost, improve efficiency, and ensure environmental protection. In this context, successful public-private partnerships require a thorough analysis of opportunities, a deliberate attention to process details, and a continuous examination of services to determine whether they are more effectively performed by the private sector. A comparative assessment of municipal solid waste collection services in the two largest cities in Lebanon where until recently municipal solid waste collection is private in one and public in the other is conducted. While quality of municipal solid waste collection improved, due to private sector participation, the corresponding cost did not, due to monopoly and an inadequate organizational plan defining a proper division of responsibilities between the private and the public sector.     

Reinventing Environmental Regulation from the Grassroots Up: Explaining and Expanding the Success of the Toxics Release Inventory

/ The success of the Toxics Release Inventory (TRI) stands in stark contrast to most other environmental regulations in the United States. Between its inception in 1988 and 1995, releases of chemicals listed on the TRI have declined by 45%. We argue the TRI has achieved this regulatory success by creating a mechanism of "populist maxi-min regulation." This style of regulation differs from traditional command-and-control in several ways. First, the majorrole of public agencies is not to set and enforce standards, but to establish an information-rich context for private citizens, interest groups, and firms to solve environmental problems. Second, environmental "standards" are not determined by expert analysis of acceptable risk, but are effectively set at the levels informed citizens will accept. Third, firms adopt pollution prevention and abatement measures in response to a dynamic range of public pressures rather than to formalized agency standards or governmental sanction. Finally, public pressure ruthlessly focuses on the worst polluters-maximum attention to minimum performers-to induce them to adopt more effective environmental practices. TRI has inadvertently set in motion this alternative style of regulation that has, in turn, dramatically reduced toxics emissions in the United States. By properly understanding the mechanisms that drive TRI's accomplishments, more intentional public policy designs can expand the system of populist maxi-min regulation and achieve even more rapid toxics reduction.     

Capital structure and asset utilization: the case of resource intensive industries

This research studies the relationship between the capital structure of a firm and its asset utilization rate in resource intensive industries. We study this issue from both private and public policy perspectives. From a private perspective, it's conceivable that a positive relationship may exist because a company is trying to increase its use of debt to effect a more efficient utilization of its assets. However, from a public policy perspective, finding a positive relationship between asset utilization and debt levels in natural resource sensitive industries may signal a sub-optimal exploitation of natural resources when debt levels rise. This research examines measures of leverage and asset utilization in firms from the mining, oil, and timber industries to determine whether the behavior alleged in the PALCO/MAXXAM case (an increased cutting rate to pay off junk bond financing) has been observed more systematically. We observe a positive relationship between leverage and asset utilization in all three industries when leverage is calculated using book value measures. When market value measures are used, this positive relationship no longer holds in the mining industry. Possible explanations for these results are offered.     

Agribusiness Opportunity Costs and Environmental Legal Protection: Investigating Trade-Off on Hotspot Preservation in the State of São Paulo,Brazil

Prior to deforestation, São Paulo State had 79,000 km² covered by Cerrado (Brazilian savanna) physiognomies, but today less than 8.5% of this biodiversity hotspot remains, mostly in private lands. The global demand for agricultural goods has imposed strong pressure on natural areas, and the economic decisions of agribusiness managers are crucial to the fate of Cerrado domain remaining areas (CDRA) in Brazil. Our aim was to investigate the effectiveness of Brazilian private protected areas policy, and to propose a feasible alternative to promote CDRA protection. This article assessed the main agribusiness opportunity costs for natural areas preservation: the land use profitability and the arable land price. The CDRA percentage and the opportunity costs were estimated for 349 municipal districts of São Paulo State through secondary spatial data and profitability values of 38 main agricultural products. We found that Brazilian private protected areas policy fails to preserve CDRA, although the values of non-compliance fines were higher than average opportunity costs. The scenario with very restrictive laws on private protected areas and historical high interest rates allowed us to conceive a feasible cross compliance proposal to improve environmental and agricultural policies.     

Integration of Satellite Imagery and Forest Inventory in Mapping Dominant and Associated Species at a Regional Scale

To achieve the overall objective of restoring natural environment and sustainable resource usability, each forest management practice effect needs to be predicted using a simulation model. Previous simulation efforts were typically confined to public land. Comprehensive forest management practices entail incorporating interactions between public and private land. To make inclusion of private land into management planning feasible at the regional scale, this study uses a new method of combining Forest Inventory and Analysis (FIA) data with remotely sensed forest group data to retrieve detailed species composition and age information for the Missouri Ozark Highlands. Remote sensed forest group and land form data inferred from topography were integrated to produce distinct combinations (ecotypes). Forest types and size classes were assigned to ecotypes based on their proportions in the FIA data. Then tree species and tree age determined from FIA subplots stratified by forest type and size class were assigned to pixels for the entire study area. The resulting species composition map can improve simulation model performance in that it has spatially explicit and continuous information of dominant and associated species, and tree ages that are unavailable from either satellite imagery or forest inventory data. In addition, the resulting species map revealed that public land and private land in Ozark Highlands differ in species composition and stand size. Shortleaf pine is a co-dominant species in public land, whereas it becomes a minor species in private land. Public forest is older than private forest. Both public and private forests have deviated from historical forest condition in terms of species composition. Based on possible reasons causing the deviation discussed in this study, corresponding management avenues that can assist in restoring natural environment were recommended.     

INSTITUTIONAL BARRIERS TO WATER MARKETING IN THE WEST1

ABSTRACT: Water marketing has been proposed as one means of reallocating water supplies in the western United States. While markets for western water currently exist and may be expected to expand, the institutional constraints within which the markets must operate will limit the ultimate size and efficiency of those markets. Lack of articulation of public interests in the water resource itself leads to incomplete definition of the private rights to use the water, and it is those private rights which are sold or leased in the market. The increase in size and efficiency of any market in water rights will be dependent on the willingness of legislatures to specifically define the nature and extent of public interests in water supplies, and detailed definition is unlikely.     

New strategy in urban water management in Mexico: the case of Mexico's Federal District

This paper focuses on the strategy of Mexico's Federal District to achieve better water management. It highlights some of the main aspects of the current institutional framework. The article starts by providing a general overview of the current state of the water sector in Mexico. An analysis of the new strategies for the provision of water services in Mexico's Federal District is presented as a case study. It exemplifies the type of private sector participation that has recently been adopted in the water sector in Mexico. The article analyzes the functions of agencies involved in water distribution in the Federal District, and discusses the performance of private firms as well as some of the main difficulties encountered. Lessons have been learned from this application. It can be concluded that long-term commitment on the part of both public and private entities is one of the key factors in achieving a more efficient urban water management. The article reflects plans implemented and approved as of January 1998.     

Eco-Labeling and ISO 14000: An Analysis of US Regulatory Systems and Issues Concerning Adoption of Type II Standards

/ Current private and public regulatory systems may not provide an optimal degree of regulation for labels bearing environmental information, and established institutions may detract from efforts to provide for better environmental management. The advent of ISO 14000 offers new opportunities for making eco-labeling a meaningful tool to encourage environmental stewardship. While new federal legislation offers the best vehicle to introduce these standards into US law, the slow pace of the legislative process may recommend an alternative system. Multinational and civic-minded firms may be expected to employ private programs to nurture benevolent environmental management practices until more definitive governmental institutions can be put in place.KEY WORDS: Eco-labels; Environmental labeling; International standards; ISO 14000     

Wildfire Risk Management on a Landscape with Public and Private Ownership: Who Pays for Protection?

Wildfire, like many natural hazards, affects large landscapes with many landowners and the risk individual owners face depends on both individual and collective protective actions. In this study, we develop a spatially explicit game theoretic model to examine the strategic interaction between landowners’ hazard mitigation decisions on a landscape with public and private ownership. We find that in areas where ownership is mixed, the private landowner performs too little fuel treatment as they “free ride”—capture benefits without incurring the costs—on public protection, while areas with public land only are under-protected. Our central result is that this pattern of fuel treatment comes at a cost to society because public resources focus in areas with mixed ownership, where local residents capture the benefits, and are not available for publicly managed land areas that create benefits for society at large. We also find that policies that encourage public expenditures in areas with mixed ownership, such as the Healthy Forest Restoration Act of 2003 and public liability for private values, subsidize the residents who choose to locate in the high-risk areas at the cost of lost natural resource benefits for others.     

Sources of productive efficiency: International comparison of iron and steel firms

Using a time-varying stochastic frontier model, this paper examines the technical efficiency of firms in the iron and steel industry to try to identify the factors contributing to the industry's efficiency growth. Industry observers and policymakers tend to cite most frequently three possible sources of efficiency growth: privatization; economies of scale; and vintage of equipment. Our study corroborates these factors. Based on our findings, which pertain to 52 iron and steel firms over the period of 1978–1997, privatization is likely to improve the efficiency of iron and steel firms to a great extent as evidenced in various industries. This study also provides systematic evidence that iron and steel production shows economies of scale. In addition, newer vintages of equipment are found to be closely correlated with higher levels of efficiency. This clearly indicates that investment in new plants and equipments is critical in pursuit of efficiency in the iron and steel industry.     

PLANNING UNDEVELOPED LAKESHORE1

ABSTRACT: Private lakeshore development usually precedes establishment of public lake access. As a result, the best access areas are often occupied before public access is provided. The public then has a problem to provide access for nonriparian citizens. This problem can be anticipated and prevented by classifying undeveloped lakeshore areas according to suitability for both private and public uses, and incorporating appropriate recommendations into the municipal, comprehensive land use plan. To accomplish this, a site evaluation system has been developed which numerically rates the lakeshore for each of four public uses: public beaches, picnic areas, boat access areas, and public marinas; and two private uses: private marinas and vacation homes. Ratings are developed for: slope, soil suitability, shoreland type, water quality, site location, scenery, and road access. These ratings are combined with a statement of public goals developed from attitude surveys to produce a lakeshore land use plan. The plan recommends that lakeshore areas best suited for private development are so used, and areas best suited for public use are reserved for that purpose. This site evaluation system is demonstrated by a case study on Lake Champlain in Ferrisburg, Vermont.     

The effect of heating technologies on CO(2) and energy efficiency of Dutch greenhouse firms

This paper uses Data Envelopment Analysis to compute measures of the efficiency (relative to a frontier) in terms of the use of all inputs as well as for single inputs like CO(2) and energy for a sample of greenhouse firms in the Netherlands over the period 1991-1995. These efficiency measures are generated for different firms specialised in production of vegetables, flowers, and potplants and with different heating technologies. The empirical results indicate that firms use energy quite efficiently and are less efficient in terms of CO(2) emissions. Firms using conventional heating are overall less efficiently using energy and CO(2) than firms using more advanced heating technologies. Most differences in efficiency between firm types and firms using different heating technologies are statistically significant. Scale adjustments can provide an important contribution to further efficiency improvements.     

Public–Private Partnerships for Solid Waste Management Services

The increasing cost of municipal solid waste (MSW) management has led local governments in numerous countries to examine if this service is best provided by the public sector or can better be provided by the private sector. Public–private partnerships have emerged as a promising alternative to improve MSW management performance with privately owned enterprises often outperforming publicly owned ones. In Lebanon, several municipalities are transforming waste management services from a public service publicly provided into a public service privately contracted. In this context, a regulated private market for MSW management services is essential. The present study examines a recent experience of the private sector participation in MSW management in the Greater Beirut Area. The results of a field survey concerning public perception of solid waste management are presented. Analysis of alternatives for private sector involvement in waste management is considered and management approaches are outlined.     

Public Versus Private: Does It Matter for Water Conservation? Insights from California

This article asks three connected questions: First, does the public view private and public utilities differently, and if so, does this affect attitudes to conservation? Second, do public and private utilities differ in their approaches to conservation? Finally, do differences in the approaches of the utilities, if any, relate to differences in public attitudes? We survey public attitudes in California toward (hypothetical but plausible) voluntary and mandated water conservation, as well as to price increases, during a recent period of shortage. We do this by interviewing households in three pairs of adjacent public and private utilities. We also survey managers of public and private urban water utilities to see if they differ in their approaches to conservation and to their customers. On the user side we do not find pronounced differences, though a minority of customers in all private companies would be more willing to conserve or pay higher prices under a public operator. No respondent in public utility said the reverse. Negative attitudes toward private operators were most pronounced in the pair marked by a controversial recent privatization and a price hike. Nonetheless, we find that California’s history of recurrent droughts and the visible role of the state in water supply and drought management undermine the distinction between public and private. Private utilities themselves work to underplay the distinction by stressing the collective ownership of the water source and the collective value of conservation. Overall, California’s public utilities appear more proactive and target-oriented in asking their customers to conserve than their private counterparts and the state continues to be important in legitimating and guiding conservation behavior, whether the utility is in public hands or private.