Joint Discussion Paper Series in Economics 44-2017
We use a hazard model to identify the factors that drive the emergence of inter-municipal cooperation (IMC). We focus on IMC in tasks of internal administration in West-Germany be-tween 2001 and 2014 - tasks where IMC may generate economies of scale while regional spill-overs are negligible. Our results support the homophily-hypothesis and the relevance of politi-cal transaction costs. Municipalities situated in clusters of small and shrinking municipalities are more likely to start IMC. At odds with the previous literature, IMC is more likely to emerge among municipalities in fiscally strong clusters. We find no evidence that IMC is more likely in certain phases of the election cycle while state subsidies for IMC are an important driving force behind IMC.
Inter-municipal cooperation hazard model Germany survey