Joint Discussion Paper Series in Economics 14-2014
This contribution studies the determinants of intermunicipal cooperation for small Hessian municipalities. Existing contributions have highlighted the role of cooperation demand factors, for example fiscal stress or demographic factors, on the one hand, and transaction cost issues on the other. This study asks how the spatial neighbourhood affects cooperation decision making taking characteristics of neighbouring municipalities into account (cooperation supply). The study focuses on intermunicipal cooperations in the field of labor intensive public administration services, for example, management and accounting tasks, personnel administration or civil registry offices. We find that the main driving forces are fiscal stress, population growth and size heterogeneity. Neighbourhood-related supply factors are only weakly significant. Cooperation is more likely for municipalities that are part of a set of neighbouring municipalities which are heterogeneous with respect to size.