Does Intermunicipal Cooperation Increase Efficiency? Evidence from the Hessian Wastewater Sector

Frédéric Blaeschke and Peter Haug

No 11/2014, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: This paper analyzes the relationship between intermunicipal cooperation and efficiency of public service provision. The organizational arrangements, including self-provision, joint pro-vision or contracting, affect politicians' and bureaucrats' incentives as well as internal transaction costs. Hence, cooperation gains from scale effects have to be weighed against technical inefficiencies. We analyze wastewater disposal for a unique dataset of small and medium-sized Hessian municipalities. We employ a two-stage DEA (DEA = Data Envelopment Analysis) bootstrap approach to calculate relative efficiency measures controlling for organizational arrangements and further environmental variables. Jointly providing municipalities and contractor municipalities score lower in terms of technical efficiency than self-providing and contracting municipalities. The scope for increasing scale efficiency turns out to be limited and hence, only small municipalities may benefit from scale economies from cooperation. The findings suggest that small municipalities should rely on contracting or on joint provision with a high degree of vertical integration.

Keywords: municipal cooperation; local public finance; efficiency; DEA; sewage disposal; interkommunale Kooperation; Kommunalfinanzen; Effizienz; DEA; Abwasserentsorgung (search for similar items in EconPapers)
JEL-codes: D23 D24 D73 H72 R5 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:iwh-11-14

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