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Inter-municipal collaboration does not save money

Spending not lower, services not measurably improved
28 November 2017
Maarten Allers

Inter-municipal collaboration took off between 2005 and 2013. In that period, spending through inter-municipal collaboration increased fourfold to over eight billion euros per year. Contrary to popular belief, such collaboration does not reduce municipal spending, nor does it lead to a measurable improvement in municipal services. These are the conclusions of Maarten Allers and Tom de Greef from the Centre for Research on Local Government Economics (COELO), a research institute at the University of Groningen. They publish their findings today in the economics journal ESB.

COELO researched whether the level of inter-municipal collaboration influenced municipal spending per resident in the period from 2005 to 2013. Corrections were made for numerous demographic, economic and political factors. The research found that inter-municipal collaboration does not affect total municipal spending. Even after several years, there is no financial advantage for municipalities who collaborate more. Collaboration can save money in certain areas, but this is not visible in the total spend.

Economies of scale for small municipalities?

It is often thought that small municipalities do not have the scale to be able to perform certain tasks efficiently. COELO therefore also researched whether collaboration has a different effect on small municipalities from on larger ones. They actually found that spending by small municipalities is more likely to increase than decrease when they collaborate with other municipalities. This is also true for large municipalities. Collaboration has no effect on spending by medium-sized municipalities.

Different policy fields

The effect of collaboration can vary per policy field. COELO therefore also looked at spending in three specific ones. Collaboration proved to have no effect on spending on waste collection and social services collaboration. It does save money on tax collection though, with it decreasing by 15% on average. However, as tax collection only constitutes 0.4% of the total municipal budget, this does not translate into marked savings.

Level of services

COELO also researched whether collaboration leads to better municipal services. They found no indication of this. Allers: ‘This relationship is difficult to measure, so our findings do not prove that collaboration does not improve services. We simply did not find any indication that it does.’

No savings from redrawing municipal boundaries

COELO previously conducted research into the effect of redrawing municipal boundaries . This does not result in savings either, not even for small municipalities. The size of a municipality is thus less important than policymakers tend to think.

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Last modified:13 March 2020 01.45 a.m.
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