It Depends on What You Share: The Elusive Cost Savings from Service Sharing

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"Inter-municipal cooperation is the most prevalent alternative service delivery method for US local governments. While aspirations for budgetary savings are one motivating factor, increased service quality and regional coordination are also important goals. We use an original 2013 survey of local governments in New York State to assess the level of service sharing and outcomes. We match our survey with twenty years (1996-2016) of service-level costs data to explore the relationships between sharing and costs across twelve common local government services. Our multivariate time series regressions find that service sharing leads to cost reductions in solid waste management, roads & highways, police, library, and sewer services; no difference in costs for economic development, ambulance/EMS, fire, water, and youth recreation; and higher costs in elder services and planning & zoning. These differences are explained by whether services have characteristics such as asset specificity and the ability to achieve economies of scale on the one hand, or if sharing leads to greater administrative intensity or quality and regional coordination outcomes on the other hand. We also analyze the effect of sharing on service costs over time, and find solid waste management, roads & highways, police, and library are the only services where costs show a continued downward trend. Because cost savings are elusive, public sector reformers should be careful not to assume cost savings from sharing."
cooperation, transaction costs, local governance