Do municipal unions improve cost efficiency for the social function? A quasi-experimental endogenous stochastic frontier approach

Abstract

Homogeneous national policies can generate heterogeneous effects on the territory. This paper aims to verify the impact of the entry of single Italian municipalities into an inter-municipal association on the unitary costs of the social services supplied to the local communities. Panel cost stochastic frontier model in the presence of endogeneity has been introduced based on two pillars: a counterfactual setting to verify the aggregation effects concerning a set of similar municipalities and the use of a cost efficiency estimation methodology which considers the endogeneity of output with respect to cost. The results of our analysis show that the effects of adopting associated forms of service delivery can be very multifaceted and diversified according to the typology and the degree of implementation of the Municipal Union itself. The analysis sheds light on the effects of municipalities' organisational choices, addressing the consolidation of small municipalities not in binary terms but also—and above all—suggesting that it is the type of union that impacts the possibility of convergence towards greater cost efficiency.