Policy Evaluation of Wide-Area Cooperation between Municipalities: Empirical Analysis with “Self-support settlement region framework” as the Case Study

This paper aims to quantitatively verify the outcomes of the “self-support settlement region framework” concept, which is a wide-area collaboration initiative between municipalities in Japan. Intermunicipal cooperation (IMC) has two effects. The first is that improvements in the efficiency of resource allocation for the supply of public services (internalization of economic externalities) are expected to contribute to an increase in the number of residents, or halt the decline in the number of residents, through improved daily life functions across the whole area. The second effect is an anticipated decline in the average cost of public services through economies of scale. In view of this, this paper uses the rates of population change and social change as performance indicators for the former, and real expenditure per capita as the performance indicator for the latter, to estimate the impact (causal effect) that the formation of the “self-support settlement region framework” has on such performance indicators. However, as the formation of the “self-support settlement region framework” is based on voluntary decision-making by the municipalities, areas that are experiencing a serious population decline may be more likely to select the formation of such areas in order to strengthen the sustainability of their community through area-wide initiatives. To avoid this selection bias, we combined the use of propensity score matching (PSM) and difference-in-difference (DID) analysis to eliminate municipality-specific effects that do not change over time. The analysis showed that the formation of the “self-support settlement region framework,” compared to the non-formation of such areas, did not contribute to increasing or maintaining population numbers. Moreover, real expenditure per capita did not decrease after the formation of the “self-support settlement region framework,” but rather, supdemonstrated an upward trend. While a core city in the “self-support settlement region framework” should have facilitated consensus building and adjustment of interests with surrounding municipalities, in reality, the cooperation remained along the lines of conventional cooperation without extending beyond easily collaborative fields, such as industrial policy, tourism promotion, and disaster measures. Consequently, improvements to the daily life functions and economies of scale across the whole of the area were not realized, and the “self-support settlement region framework” did not ultimately contribute to maintaining or increasing population numbers, nor to reducing expenditures.