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Does inter-municipal cooperation increase efficiency? Evidence from Italy

Author

Listed:
  • Giuseppe Gori

    (Istituto Regionale di Programmazione Economica della Toscana - IRPET)

  • Patrizia Lattarulo

    (Istituto Regionale di Programmazione Economica della Toscana - IRPET)

  • Francesco Porcelli

    (Università degli Studi di Bari-Aldo Moro)

  • Leonzio Rizzo

    (Università degli Studi di Ferrara & IEB)

  • Riccardo Secomandi

    (Università degli Studi di Ferrara)

Abstract

Evidence on the impact of municipal amalgamation and cooperation is mixed and most of the existing literature is focused on the effect on the cost per capita, which, however, is not sufficient to test for a potential increase in efficiency. Therefore, the evaluation of the impact on the physical output of municipal services is needed. This is why we use a panel dataset with all Italian municipalities, covering four years, with details on expenditure and output related to six different local services provided by municipalities. The first novelty of our work is including the local service dimension in the analysis. This dimension is extremely important to properly evaluate the impact of inter-municipal cooperation, which, differently from amalgamation, usually covers only some specific services. In our analysis, we exploit the fact that municipalities choose to enter a municipal association at different years. Therefore, we evaluate the impact of intermunicipal cooperation on per-capita expenditure and output by using the within variation in each municipality and municipal service. The second novelty is the use of specific indexes of direct output for the provided services. We find that inter-municipal cooperation decreases per capita expenditure leaving output unchanged, thus generating an increase in efficiency. Interestingly, when we concentrate the analysis on small municipalities with less than 3,000 inhabitants, inter- municipal cooperation leads also to increase in output. We conclude that inter-municipal cooperation is extremely relevant in sorting out financial constraints of small municipalities when they need to provide services with high fixed costs. This result is particularly important in Italy where 56% of municipalities has less than 3,000 inhabitants. The effect is more pronounced as the number of associated municipalities increases and when there is at least one big municipality in the association.

Suggested Citation

  • Giuseppe Gori & Patrizia Lattarulo & Francesco Porcelli & Leonzio Rizzo & Riccardo Secomandi, 2023. "Does inter-municipal cooperation increase efficiency? Evidence from Italy," Working papers 111, Società Italiana di Economia Pubblica.
    • Handle: RePEc:ipu:wpaper:111
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    References listed on IDEAS

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    Cited by:

    1. Mehdi Guelmamen, 2024. "Does Intermunicipal Cooperation Affect Prices? An Economic Analysis of the French Drinking Water Sector," Working Papers AFED 24-10, Association Francaise d'Economie du Droit (AFED).

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    More about this item

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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