Political Economy of Intermunicipal Health Consortia Formation: Effects of Income and Preference Heterogeneity among Municipalities

Abstract

This article presents models of electoral competition in municipalities in which candidates for mayor announce platforms consisting of the amount of health services to be provided and the corresponding tax schedules. Health services can be provided in an autarkic way or by means of a consortium of two municipalities. The paper studies the effects of income and preference heterogeneity among municipalities. Only when municipalities are totally homogeneous may one assert that the consortium brings about an increase in the provision of health services. Moreover, homogeneous consortia tend to be formed whereas heterogeneous municipalities tend to remain separated.