Inter-municipal Cooperation and Cost Savings: Myth or Reality?

Cost reduction, increase in efficiency and the improvement of the quality of public services, together with the reduction of the size and scope of the public sector, are among the most recurrent themes of the New Public... [ view full abstract ]

Cost reduction, increase in efficiency and the improvement of the quality of public services, together with the reduction of the size and scope of the public sector, are among the most recurrent themes of the New Public Management (Hood, 1991) and are the pillars of all public sector reforms all over the world.

Local governments in particular, over the last decade have experienced a drastic reduction in the resources available for the provision of services, and faced growing problems in ensuring adequate levels of quality of the services. Different strategies have been designed to cope with these problems, among which inter-municipal cooperation, based on the idea that economies of scale and scope may allow a reduction in the cost of service delivery (Warner, 2015). However, several studies show that cost reduction is rarely achieved through the cooperation between different municipalities (Oates 1988).

In Italy, a typology of inter-municipal cooperation (a kind of city alliance), the so-called Unione di Comuni, has emerged since 2000, in order to provide joint delivery of services, save money and gain economy of scope and scale. This paper aims at providing empirical evidence of the results (in term of cost reduction) achieved through inter-municipal cooperation so far, by analyzing a sample of municipalities that transferred some specific functions (which correspond to a set of services) to a Unione di Comuni. The Public Account System (PAS) provides the official data related to the cost incurred to deliver specific functions for both the individual municipalities and the Unioni di Comuni.

Based on a comparison between the expenditure for delivering a sample of functions by a group of Italian municipalities before the decision to transfer those functions to the Unioni di Comuni and the expenditure incurred for the same functions by the Unioni di Comuni after the transer (when municipalities stopped delivering those functions individually), the paper investigates whether or not the joint provision of the functions has resulted in a real reduced cost delivery.