IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/halshs-00787600.html
   My bibliography  Save this paper

Cooperation among local governments to deliver public services : a "structural" bivariate response model with fixed effects and endogenous covariate

Author

Listed:
  • Edoardo Di Porto

    (EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie - Université de Lille, Sciences et Technologies - Université de Lille, Sciences Humaines et Sociales - PRES Université Lille Nord de France - Université de Lille, Droit et Santé)

  • Vincent Merlin

    (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)

  • Sonia Paty

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

Abstract

Cooperation among local governments has been encouraged to enable the aggregation of resources and improved public sector efficiency. However, if cooperation through the joint delivery of local public services is likely to be welfare enhancing for the agglomeration, but will lead to losses for one of the parties, it is unlikely that the losing municipality will cooperate. Using a unique panel dataset of 30,000 French municipalities for 1995-2003, we estimate the relationship between cooperation decision and the fiscal revenues raised to provide local public goods. We employ a new econometric strategy based on Lee (1978), developing a non linear method controlling for fixed effect, endogenous covariates and cluster standard error. We find evidence that a positive difference between the expected fiscal revenues of a cooperating locality and the actual revenues realized by an isolated locality significantly increases the probability of joining an inter-municipal community.

Suggested Citation

  • Edoardo Di Porto & Vincent Merlin & Sonia Paty, 2013. "Cooperation among local governments to deliver public services : a "structural" bivariate response model with fixed effects and endogenous covariate," Working Papers halshs-00787600, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00787600
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00787600
    as

    Download full text from publisher

    File URL: https://shs.hal.science/halshs-00787600/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Besley, Timothy & Case, Anne, 1995. "Incumbent Behavior: Vote-Seeking, Tax-Setting, and Yardstick Competition," American Economic Review, American Economic Association, vol. 85(1), pages 25-45, March.
    2. Lorenz Blume & Tillmann Blume, 2007. "The economic effects of local authority mergers: empirical evidence for German city regions," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 41(3), pages 689-713, September.
    3. Reingewertz, Yaniv, 2012. "Do municipal amalgamations work? Evidence from municipalities in Israel," Journal of Urban Economics, Elsevier, vol. 72(2), pages 240-251.
    4. Miceli Thomas J., 1993. "The Decision to Regionalize in the Provision of Education: An Application of the Tiebout Model," Journal of Urban Economics, Elsevier, vol. 33(3), pages 344-360, May.
    5. Papke, Leslie E. & Wooldridge, Jeffrey M., 2008. "Panel data methods for fractional response variables with an application to test pass rates," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 121-133, July.
    6. Rudie Hulst & André Montfort & Arto Haveri & Jenni Airaksinen & Josephine Kelly, 2009. "Institutional Shifts In Inter-Municipal Service Delivery," Public Organization Review, Springer, vol. 9(3), pages 263-285, September.
    7. Brennan,Geoffrey & Buchanan,James M., 2006. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521027922, September.
    8. Wildasin, David E., 1988. "Nash equilibria in models of fiscal competition," Journal of Public Economics, Elsevier, vol. 35(2), pages 229-240, March.
    9. Saarimaa, Tuukka & Tukiainen, Janne, 2010. "Coalition formation and political decision making: Evidence from Finnish municipal mergers," Working Papers 19, VATT Institute for Economic Research.
    10. Quentin Frère & Matthieu Leprince & Sonia Paty, 2014. "The Impact of Intermunicipal Cooperation on Local Public Spending," Urban Studies, Urban Studies Journal Limited, vol. 51(8), pages 1741-1760, June.
    11. Rune Sørensen, 2006. "Local government consolidations: The impact of political transaction costs," Public Choice, Springer, vol. 127(1), pages 75-95, April.
    12. Wooldridge, Jeffrey M., 1995. "Selection corrections for panel data models under conditional mean independence assumptions," Journal of Econometrics, Elsevier, vol. 68(1), pages 115-132, July.
    13. Sylvie Charlot & Sonia Paty & Virginie Piguet, 2015. "Does Fiscal Cooperation Increase Local Tax Rates in Urban Areas?," Regional Studies, Taylor & Francis Journals, vol. 49(10), pages 1706-1721, October.
    14. Eric Weese, 2011. "Political Mergers as Coalition Formation," Working Papers 997, Economic Growth Center, Yale University.
    15. Hoyt, William H., 1991. "Property taxation, Nash equilibrium, and market power," Journal of Urban Economics, Elsevier, vol. 30(1), pages 123-131, July.
    16. Lee, Lung-Fei, 1978. "Unionism and Wage Rates: A Simultaneous Equations Model with Qualitative and Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 415-433, June.
    17. Salmon, Pierre, 1987. "Decentralisation as an Incentive Scheme," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 3(2), pages 24-43, Summer.
    18. Rosenthal Stuart S. & Helsley Robert W., 1994. "Redevelopment and the Urban Land Price Gradient," Journal of Urban Economics, Elsevier, vol. 35(2), pages 182-200, March.
    19. Cassette, Aurélie & Di Porto, Edoardo & Foremny, Dirk, 2012. "Strategic fiscal interaction across borders: Evidence from French and German local governments along the Rhine Valley," Journal of Urban Economics, Elsevier, vol. 72(1), pages 17-30.
    20. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    21. Hart, Sergiu & Kurz, Mordecai, 1983. "Endogenous Formation of Coalitions," Econometrica, Econometric Society, vol. 51(4), pages 1047-1064, July.
    22. Brasington, David M., 1999. "Joint provision of public goods: the consolidation of school districts," Journal of Public Economics, Elsevier, vol. 73(3), pages 373-393, September.
    23. Papke, Leslie E., 2005. "The effects of spending on test pass rates: evidence from Michigan," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 821-839, June.
    24. Moisio, Antti, 2012. "Rethinking local government: Essays on municipal reform," Research Reports P61, VATT Institute for Economic Research.
    25. Gordon, Nora & Knight, Brian, 2009. "A spatial merger estimator with an application to school district consolidation," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 752-765, June.
    26. Spolaore, Enrico, 2004. "Is small really so ugly?," World Trade Review, Cambridge University Press, vol. 3(3), pages 447-452, November.
    27. Brueckner, Jan K & Follain, James R, 1988. "The Rise and Fall of the ARM: An Econometric Analysis of Mortgage Choice," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 93-102, February.
    28. Edoardo Di Porto & Federico Revelli, 2013. "Tax‐Limited Reaction Functions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(5), pages 823-839, August.
    29. Jan K. Brueckner, 2003. "Strategic Interaction Among Governments: An Overview of Empirical Studies," International Regional Science Review, , vol. 26(2), pages 175-188, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Edoardo Di Porto & Angela Parenti & Sonia Paty & Zineb Abidi, 2017. "Local government cooperation at work: a control function approach," Journal of Economic Geography, Oxford University Press, vol. 17(2), pages 435-463.
    2. L. Wilner, 2020. "How do citizens perceive centralization reforms? Evidence from the merger of French regions," Documents de Travail de l'Insee - INSEE Working Papers g2020-07, Institut National de la Statistique et des Etudes Economiques.
    3. Massimiliano Ferraresi & Giuseppe Migali & Leonzio Rizzo, 2017. "Does Inter-municipal Cooperation promote efficiency gains? Evidence from Italian Municipal," Working papers 59, Società Italiana di Economia Pubblica.
    4. Christian Bergholz & Ivo Bischoff, 2018. "Local council members’ view on intermunicipal cooperation: does office-related self-interest matter?," Regional Studies, Taylor & Francis Journals, vol. 52(12), pages 1624-1635, December.
    5. Agiamoh Rosaline Georgevna, 2021. "Inter-Regional Cooperation in Waste Management: New Trends in Moscow and the Moscow Region," NISPAcee Journal of Public Administration and Policy, Sciendo, vol. 14(2), pages 9-39, December.
    6. Germà Bel & Mildred E. Warner, 2016. "Factors explaining inter-municipal cooperation in service delivery: a meta-regression analysis," Journal of Economic Policy Reform, Taylor and Francis Journals, vol. 19(2), pages 91-115, April.
    7. Paolo Di Caro & Giuseppe Nicotra, 2016. "Short, Long and Spatial Dynamics of Informal Employment," Regional Studies, Taylor & Francis Journals, vol. 50(11), pages 1804-1818, November.
    8. Allers, Maarten & van Ommeren, Bernard & Geertsema, Bieuwe, 2015. "Does intermunicipal cooperation create inefficiency? A comparison of interest rates paid by intermunicipal organizations, amalgamated municipalities and not recently amalgamated municipalities," Research Report 15003-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    9. Christian Bergholz & Ivo Bischoff, 2015. "Citizens‘ preferences for inter-municipal cooperation in rural areas: evidence from a survey in three Hessian counties," MAGKS Papers on Economics 201523, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    10. Giuseppe Liddo & Michele G. Giuranno, 2020. "The political economy of municipal consortia and municipal mergers," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(1), pages 105-135, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Edoardo Di Porto & Angela Parenti & Sonia Paty & Zineb Abidi, 2017. "Local government cooperation at work: a control function approach," Journal of Economic Geography, Oxford University Press, vol. 17(2), pages 435-463.
    2. Clémence Tricaud, 2019. "Better alone? Evidence on the costs of intermunicipal cooperation," Economics Working Paper from Condorcet Center for political Economy at CREM-CNRS 2019-12-ccr, Condorcet Center for political Economy.
    3. repec:hal:journl:hal-03380333 is not listed on IDEAS
    4. Sylvie Charlot & Sonia Paty & Virginie Piguet, 2015. "Does Fiscal Cooperation Increase Local Tax Rates in Urban Areas?," Regional Studies, Taylor & Francis Journals, vol. 49(10), pages 1706-1721, October.
    5. Thierry Madiès & Sonia Paty & Yvon Rocaboy, 2005. "Les stratégies fiscales des collectivités locales. De la théorie à la réalité," Revue de l'OFCE, Presses de Sciences-Po, vol. 94(3), pages 283-315.
    6. Agrawal, David R., 2016. "Local fiscal competition: An application to sales taxation with multiple federations," Journal of Urban Economics, Elsevier, vol. 91(C), pages 122-138.
    7. Baskaran, Thushyanthan, 2014. "Identifying local tax mimicking with administrative borders and a policy reform," Journal of Public Economics, Elsevier, vol. 118(C), pages 41-51.
    8. Quentin Frère & Matthieu Leprince & Sonia Paty, 2014. "The Impact of Intermunicipal Cooperation on Local Public Spending," Urban Studies, Urban Studies Journal Limited, vol. 51(8), pages 1741-1760, June.
    9. Blesse, Sebastian & Baskaran, Thushyanthan, 2016. "Do municipal mergers reduce costs? Evidence from a German federal state," Regional Science and Urban Economics, Elsevier, vol. 59(C), pages 54-74.
    10. Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2004. "Yardstick competition in intergovernmental relationships: theory and empirical predictions," Economics Letters, Elsevier, vol. 83(3), pages 325-333, June.
    11. Johan Lundberg, 2021. "Horizontal interactions in local personal income taxes," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 67(1), pages 27-46, August.
    12. Maria Elkhdari (a), Samira Oukarfi (b), Samir Zine El Alaoui (b) and Youness Sahibi (c), 2021. "Are Strategic Interactions between Moroccan Local Governments Geographical or Political?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 46(1), pages 33-52, March.
    13. Małkowska, Agnieszka & Telega, Agnieszka & Głuszak, Michał & Marona, Bartłomiej, 2021. "Spatial diversification of property tax policy – Searching for yardstick competition in Polish metropolitan areas," Land Use Policy, Elsevier, vol. 109(C).
    14. Lars P. Feld, 2006. "Regulatory Competition and Federalism in Switzerland: Diffusion by Horizontal and Vertical Interaction," CREMA Working Paper Series 2006-22, Center for Research in Economics, Management and the Arts (CREMA).
    15. Borck, Rainald & Fossen, Frank M. & Freier, Ronny & Martin, Thorsten, 2015. "Race to the debt trap? — Spatial econometric evidence on debt in German municipalities," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 20-37.
    16. Fredrik Andersson & Rikard Forslid, 2003. "Tax Competition and Economic Geography," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 5(2), pages 279-303, April.
    17. Sylvie Charlot & Sonia Paty, 2010. "Do Agglomeration Forces Strengthen Tax Interactions?," Urban Studies, Urban Studies Journal Limited, vol. 47(5), pages 1099-1116, May.
    18. George Crowley, 2012. "Spatial dependence in constitutional constraints: the case of US states," Constitutional Political Economy, Springer, vol. 23(2), pages 134-165, June.
    19. Baskaran, Thushyanthan, 2013. "Identifying local tax mimicking: Administrative borders and a policy reform," University of Göttingen Working Papers in Economics 157, University of Goettingen, Department of Economics.
    20. Michael P. Devereux & Simon Loretz, 2013. "What Do We Know About Corporate Tax Competition?," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(3), pages 745-774, September.
    21. Saarimaa, Tuukka & Tukiainen, Janne, 2012. "Politics in coalition formation of local governments," LSE Research Online Documents on Economics 58528, London School of Economics and Political Science, LSE Library.

    More about this item

    Keywords

    inter-municipal cooperation; fiscal revenues; bivariate response variable; panel data; endogeneity;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H4 - Public Economics - - Publicly Provided Goods
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:halshs-00787600. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.