Municipal population size and the benefits of inter-municipal cooperation: panel data evidence from Japan

ABSTRACT

Intermunicipal cooperation (IMC) facilitates efficient public service delivery. This study measures how the benefits municipalities gain through IMC differ according to municipal population size and service provision type. Focusing on public health and fire protection services, this study employs panel data regression for 1,706 Japanese municipalities over a five-year period, 2012–2017. This study has several major findings. First, an increase in the IMC spending ratio reduces public spending in both the studied services. Second, the marginal effect of IMC varies depending on the size of the municipal population. More specifically, the marginal effect of IMC on public health has a narrow confidence interval with a wide ranging population scale, while the marginal effect of IMC on fire protection produces negative values for only 151 municipalities due to extensive standard error. These findings can help municipalities take advantage of IMC to improve public service delivery.

KEYWORDS:

• Intermunicipal cooperation
• public spending
• municipal population
• panel data
• public service

Acknowledgments

The authors are grateful to Masayoshi Hayashi and participants at the 2017 ARSC annual meeting in Tokyo for their helpful comments.

Disclosure statement

No potential conflict of interest was reported by the authors.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

1. According to Brown and Potoski (2005), transaction cost theory is defined by the service characteristics associated with contracting efficacy. Transaction costs can be divided into multiple categories, including information, negotiation, and monitoring costs. Transaction costs are likely to be higher when service outcomes are difficult to measure and asset-specific investments are required. Consequently, the costs may outweigh the potential benefits.

Additional information

Funding

This work was supported by JSPS KAKENHI Grant Numbers JP17K18919 and JP18J11698.

Notes on contributors

Hiroki Baba

Hiroki Baba is a PhD candidate at the Department of Urban Engineering, Graduate School of Engineering, University of Tokyo, Japan. His current research interests include inter-municipal cooperation, shrinking city studies, and urban planning.

Yasushi Asami

Yasushi Asami is a professor at the Department of Urban Engineering, Graduate School of Engineering, University of Tokyo, Japan. His current research interests include residential environment, housing policy, and urban planning.