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.