Does Intermunicipal Cooperation Save Costs? Evidence from the Netherlands

Whereas amalgamation increases scale across the board, local governments can increase scale in particular policy fields through cooperation with other local governments. This is often thought to improve effectiveness and efficiency, but there is as yet little empirical evidence that supports this. We study the case of the Netherlands, which has been a veritable laboratory of intermunicipal cooperation (IMC), using panel data for 2005-2013. Surprisingly, we do not find any influence of IMC on total municipal spending. This implies that either economies of scale are absent or cost savings have been used for other expenditures. The latter might have improved public service levels, but we do not find any effect of IMC on house prices that could substantiate this hypothesis. There is one specific field where we do find a spending reduction caused by IMC: tax collection. Spending in this field is relatively low, which might explain why this saving cannot be traced in total spending.