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Does Inter-municipal Cooperation promote efficiency gains? Evidence from Italian Municipal

Massimiliano Ferraresi (), Giuseppe Migali () and Leonzio Rizzo ()

Working papers from Società Italiana di Economia Pubblica

Abstract: Inter-municipal cooperation is a widespread phenomenon among municipalities as a way to provide local public services, exploit economies of scale and internalise externalities. While the determinants driving the decision to cooperate have been deeply analyzed in the literature, little is known about possible efficiency gains. We test their existence in terms of local public expenditures reductions by investigating the Italian experience of Municipal Unions. We exploit unique administrative data on 335 municipalities located in the Emilia Romagna region, for the period 2001-2011. Using a difference-in-differences approach combined with matching models, we find that being in a Municipal Union reduces the total per capita current expenditures by around 5%. The effect is robust, persistent and increasing up to nine years after entrance. Furthermore, joining a Municipal Union does not reduce the level of local public services. Hence, the Municipal Union is an effective tool that allows municipalities to gain efficiency.

Keywords: Municipal Union cooperation; public expenditure; difference-in-differences; matching (search for similar items in EconPapers)
JEL-codes: H71 H72 C23 (search for similar items in EconPapers)
Date: 2017-06
New Economics Papers: this item is included in nep-eff, nep-eur and nep-ure
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