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Does Intermunicipal Cooperation Increase Efficiency? Evidence from the Hessian Wastewater Sector

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  • Blaeschke, Frédéric
  • Haug, Peter

Abstract

This paper analyzes the relationship between intermunicipal cooperation and efficiency of public service provision. The organizational arrangements, including self-provision, joint pro-vision or contracting, affect politicians' and bureaucrats' incentives as well as internal transaction costs. Hence, cooperation gains from scale effects have to be weighed against technical inefficiencies. We analyze wastewater disposal for a unique dataset of small and medium-sized Hessian municipalities. We employ a two-stage DEA (DEA = Data Envelopment Analysis) bootstrap approach to calculate relative efficiency measures controlling for organizational arrangements and further environmental variables. Jointly providing municipalities and contractor municipalities score lower in terms of technical efficiency than self-providing and contracting municipalities. The scope for increasing scale efficiency turns out to be limited and hence, only small municipalities may benefit from scale economies from cooperation. The findings suggest that small municipalities should rely on contracting or on joint provision with a high degree of vertical integration.

Suggested Citation

  • Blaeschke, Frédéric & Haug, Peter, 2014. "Does Intermunicipal Cooperation Increase Efficiency? Evidence from the Hessian Wastewater Sector," IWH Discussion Papers 11/2014, Halle Institute for Economic Research (IWH).
    • Handle: RePEc:zbw:iwhdps:iwh-11-14
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    Cited by:

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    3. Giuseppe Gori & Patrizia Lattarulo & Francesco Porcelli & Leonzio Rizzo & Riccardo Secomandi, 2023. "Does inter-municipal cooperation increase efficiency? Evidence from Italy," Working papers 111, Società Italiana di Economia Pubblica.

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    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • R5 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis

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