Does Cooperation Increase Service Delivery Costs? A comparative study of municipal and inter-municipal fire services in Norway

Recent reviews have requested further research on how cooperation between local governments affects costs. The main objective of this paper is to make a contribution to this gap in the literature by investigating (1) whether... [ view full abstract ]

Recent reviews have requested further research on how cooperation between local governments affects costs. The main objective of this paper is to make a contribution to this gap in the literature by investigating (1) whether inter-municipal cooperation leads to more expensive service delivery than producing services hierarchically, (2) whether the number of members in a cooperation affects cost, (3) whether the effect of cooperation is dependent on organizational size and (4) if different forms of cooperation affect cost differently. Conceptually these questions imply whether cooperation promotes scale economies or if transaction costs exceeds potential scale advantages. We seek to answer this by analyzing how cooperation and non-cooperation within Norwegian fire departments affect operating costs. Results show that inter-organizational cooperation is a more costly organizational form than the traditional hierarchy - but how much more costly it is depends on the number of actors involved. It also shows that cooperation based on market-principles or as joint organizations comes out as a marginally equal solution when it comes to cost efficiency.