Cooperation among Local Governments to Deliver Public Services

Abstract

Cooperation among local governments has been encouraged to enable the aggregation of resources and improved public sector efficiency. The objective of this article is to contribute to the emerging literature on the factors driving intermunicipal cooperation. Using a unique panel dataset of 36,000 French municipalities for 1995-2002, we estimate the relationship between cooperation decision and the fiscal revenues raised to provide local public goods. We find that the cooperation choice of neighboring municipalities is extremely relevant for the cooperation decision. A municipality will be more inclined to join an existing community if its neighbors have already joined an intermunicipal jurisdiction. We also find evidence that, ceteris paribus, a positive difference between the expected fiscal revenues of a cooperating locality and the actual revenues realized by an isolated locality is required to set up the agreement.