Economies of Scope in the Provision of Local Public Services

The purpose of this paper is to model municipalities as multiproduct "firms" and measure economies of scope. Our technique—based on Farrell-type efficiency measures—is applied to a sample of California municipalities. Although primarily illustrative, our results suggest that potential economies of scope may well exist in the provision of municipal services which in turn suggests consideration of such effects when analyzing the case for privatization of public services.