Better alone? Evidence on the costs of intermunicipal cooperation

While central governments encourage intermunicipal cooperation to achieve economies of scale, municipalities are generally reluctant to integrate. This paper provides new evidence on the costs of integration by assessing the causal impact of integration on municipalities resisting cooperation. Exploiting a 2010 reform in France that forced non-integrated municipalities to enter an intermunicipal community, I show that the loss of autonomy over urban planning plays a key role in explaining their opposition. Using a difference-in-differences strategy, I find that municipalities forced to integrate experienced a 12.2 percent increase in the number of building permits delivered. Additional results suggest that municipalities were resisting further urban development to avoid congestion rather than to exclude minorities or prevent housing prices to fall. Exploring the impact of integration on fiscal revenues and public services, I find that, while congestion costs appear key in understanding urban municipalities’ resistance, rural municipalities’ opposition seems mainly driven by the loss of access to local public services. Overall, these results shed new light on the tension between the potential aggregate benefits sought by governments and local negative externalities driving municipalities’ opposition.