Inter-municipal cooperation, economies of scale and cost efficiency: an application of stochastic frontier analysis to Dutch municipal tax departments

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Abstract

Inter-municipal cooperation is increasingly popular in European countries. Saving cost is a key motivation. This paper analyses the relation between inter-municipal cooperation and cost efficiency among Dutch municipal tax departments between 2005 and 2012. Motivated by the notion that cost savings are ascribed to scale economies, the relation between cooperation and cost is modelled explicitly through scale. The size of the cooperation is incorporated as a determinant of cost efficiency. The results indicate that inter-municipal cooperation can contribute to reducing cost and that the relation can be explained by scale. Municipalities or cooperations sized around 10,000 inhabitants are estimated up to 30% inefficient. At 60,000 inhabitants, the benefits of scaling are largely exhausted. Other than through scale, municipalities that cooperate are not estimated to operate significantly more or less efficient.

Original languageEnglish
Pages (from-to)533-554
Number of pages22
JournalLocal Government Studies
Volume43
Issue number4
DOIs
Publication statusPublished - 4 Jul 2017

Keywords

  • efficiency analysis
  • Inter-municipal cooperation
  • local government
  • scale economies

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