Stronger together? Assessing the causal effect of inter‐municipal cooperation on the efficiency of small Italian municipalities

Abstract

When local governments are small and fragmented, promoting inter‐municipal cooperation (IMC) among them is seen as a tool to improve the management of public services by reaping economies of scale and scope. Yet, the empirical evidence on the impacts of IMC on local governments' efficiency is scarce and inconclusive. In this paper, we investigate the experience of Italy's municipal unions (Unioni di comuni). We develop an index of technical efficiency by means of robust data envelopment analysis. We then exploit nearest‐neighbor matching and fuzzy regression discontinuity design estimators to explore whether municipal unions have any impacts on the administrative efficiency of member municipalities. We fail to find any strong, significant effect.

Estimating the causal impact of an intervention on efficiency in a dynamic setting

“…Currently, there are only few studies in the efficiency literature that aim to interpret the efficiency change of a policy action in terms of causal evidence. Moreover, previous literature typically considered a two-stage procedure where in a first step the efficiency scores are computed, and in a second one, they are used as dependent variable for classical econometric estimation (see for example Hurtado Gonz alez & Herrero Chac on, 2014; Luca & Modrego, 2021;Varghese et al, 2011). However, by doing so, the issue of endogeneity in the computation of the efficiency scores, i.e.…”

Styles of inter-municipal cooperation and the multiple principal problem: a comparative analysis of European Economic Area countries

“…They yield mixed results. Luca and Modrego (2021) fail to find any strong, significant effect on local efficiency. In contrast, Ferraresi, Migali, and Rizzo (2018) find that being member of an MU reduces the total per capita current expenditure by around 5%.…”

Do municipal mergers internalise spatial spillover effects? empirical evidence from Japanese municipalities

“…Similar studies have analysed the issue from the perspective of inter-municipal cooperation (IMC) rather than municipal mergers. In these studies, the results are mixed, and show all three results: Cooperation allows small municipalities with a suboptimal size to save costs(Bel et al 2014), IMC partly improves efficiency(Banaszewska et al 2022), and it does not improve efficiency(Luca and Modrego, 2021). Then,Jannin and Sotura (2019) showed the possibility that increased fiscal integration in the provision of public goods might substantially improve welfare, by simulating the effect of a reform through redefining jurisdictions' administrative boundaries.7 In addition, there is a pioneering study byEgger et al (2022) using nightlight data showing that mergers had net positive effects on local activity in the merged municipality.…”