Does Intermunicipal Cooperation Reduce Costs? Evidence from Waste Collection

This paper examines whether intermunicipal cooperation (IMC) reduces waste collection costs in local governments. While IMC is often promoted as a cost-saving solution, empirical evidence about its effects remains mixed and context-dependent. Using panel data from 256 municipalities over 12 years, we exploit the staggered timing of IMC adoption to identify its causal effect on service costs. We find that while IMC does not affect costs on average, it has significant heterogeneous effects across different types of municipalities. IMC reduces costs for peripheral, sparse municipalities with higher waste volumes and for regional councils, particularly in Jewish municipalities. However, it increases costs for central municipalities with small waste volumes and for Arab municipalities. These findings suggest that the effectiveness of IMC as a cost-reduction strategy depends critically on local characteristics and institutional settings. Our results contribute to the understanding of efficient local public service delivery and provide evidence-based guidance for policymakers considering cooperative arrangements.