Better Alone? Evidence on the Costs of Intermunicipal Cooperation

While central governments encourage intermunicipal cooperation to achieve economies of scale, municipalities are often reluctant to integrate. This policy brief analyses the local consequences of integration and assesses whether they help explain municipalities' resistance. I focus on the 2010 reform in France that made intermunicipal cooperation mandatory, forcing around 1,800 municipalities to enter an intermunicipal community (IC). Results first show that municipalities forced to enter an IC experienced a large increase in construction following their integration. This impact is driven by urban municipalities where the demand for housing is high and where residents are likely to oppose new construction to preserve their quality of life. Second, the study finds that rural municipalities ended up with fewer local public services, increasing the distance to public services for their residents. Only municipalities forced to integrate faced such consequences of integration. In particular, I find no evidence that municipalities that had voluntarily joined a community before the 2010 law experienced the same adverse effects of integration. Yet, both types of municipality enjoyed similar benefits of integration, in terms of better access to public transport and higher fiscal revenues. These results suggest that resisting municipalities did not oppose integration due to lower benefits, but to avoid the costs associated with increased construction for urban municipalities and with the loss of public services for rural municipalities.