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Does intermunicipal cooperation promote efficiency gains? Evidence from Italian municipal unions

Intermunicipal cooperation is a common way to provide local public services, exploit economies of scale, and internalize externalities. However, little is known about possible efficiency gains. We test their existence in terms of local public expenditures reductions, by investigating the Italian experience of municipal unions. We adopt quasi-experimental methodologies using administrative data on municipalities in the Emilia Romagna region. We find that being in a municipal union reduces the total per capita current expenditures by around 5 percent, without affecting the level of local public services. The effect is robust, persistent, and increasing up to six years after entrance.