OECD PERSPECTIVES ON MUNICIPAL COOPERATIONWhat to Gain? What to Lose?
Maria-Varinia Michalun
Regional Development and Multi-level Governance Division
Centre for Entrepreneurship, SMEs, Regions and Cities, OECD
2 February, 2021
Public Governance Conference (virtual)
Estonia: Ministry of Finance
4 February 2019 – Tallinn, Estonia
• Why work together?
• The advantages and disadvantages of cooperation
• Inter-municipal cooperation practices in OECD countries
• Inter-municipal cooperation and Estonia
Outline
Why Work Together?
3
What some governments say:
Our local governments are too small to operate efficiently
Small local governments cannot meet quality standards for public services
Mergers and outsourcing are not an option for us
Our local governments are responsible for a wide variety of services and optimal production sizes vary by service
Demographic size of municipalities in the EU28
Average and median municipal size (# of inhabitants)
Municipalities by population size class
0
40 000
80 000
120 000
160 000
Czech…
Slovak…
Fra
nce
Cyp
rus
Hun
gary
Aus
tria
Spa
in
Luxe
mbo
urg
Mal
ta
Rom
ania
Ger
man
y
Cro
atia
Italy
Slo
veni
a
Pol
and
Latv
ia
Est
onia
Fin
land
Bel
gium
Bul
garia
Gre
ece
Por
tuga
l
Sw
eden
Net
herla
nds
Lith
uani
a
Den
mar
k
Irel
and
United…
Median municipal size Average municipal size
0%10%20%30%40%50%60%70%80%90%
100%
Cze
ch R
epub
lic
Fra
nce
Slo
vak
Rep
ublic
Cyp
rus
Hun
gary
Spa
in
Aus
tria
Ger
man
y
Italy
Luxe
mbo
urg
Cro
atia
Rom
ania
Mal
ta
Fin
land
Slo
veni
a
Gre
ece
Est
onia
Latv
ia
Bul
garia
Por
tuga
l
Den
mar
k
Bel
gium
Net
herla
nds
Pol
and
Sw
eden
Lith
uani
a
Uni
ted
Kin
gdom
Irel
and
Less than 2 000 inhabitants 2 000 to 4 999 inhabitants 5 000 to 19 999 inhabitants 20 000 or more inhabitants
Source: OECD (2019) Key data on regional and local governments in the European Union
To mitigate the impact of fragmentation:
Productivity and socio-spatial segregation
Productivity falls by 6% for a doubling in
the number of municipalities
(for a given population size)
Source: Ahrend, Farchy, Kaplanis and Lembcke (2014), “What Makes Cities More
Productive? Agglomeration Economies & the Role of Urban Governance: Evidence from 5
OECD Countries”, Journal of Regional Science
0
Sp
atia
l seg
reg
atio
n b
y in
com
e
Administrative fragmentation
Source: Brezzi, Boulant & Veneri (2016), “Income Levels And Inequality in Metropolitan
Areas: A Comparative Approach in OECD Countries”, OECD Regional Development
Working Papers, 2016/06
More fragmented metropolitan areas are
more segregated
000
7
Insights from the definition of Inter-municipal Co-operation
“Inter-municipal co-operation is defined as when two or more municipalities agree to work
together on any of the tasks assigned to them in order to gain mutual benefits and to
enhance the effective provision of services to citizens.”
– Council of Europe
https://www.coe.int/en/web/good-governance/imc-eap#:~:text=Inter%2Dmunicipal%20cooperation%20is%20defined,provision%20of%20services%20to%20citizens.
Inter-municipal cooperation is widespread in the OECD and it might increase after COVID:
• Firmly rooted in European and OECD municipal management practices
• It is relevant in all countries regardless of federal or unitary
• Relevant regardless of municipal size, or type (metropolitan, urban, or rural)
• Can support better governance of urban and metropolitan
The Advantages and Disadvantages to Co-operation
8
The advantages
Inter-municipal
cooperation
Efficiency gains and
cost savings
Investing at the right
scale
Gaining fiscal space
Better, more diverse local
services
Staff performance/
expertise
Innovation+
Technology
Alternative to mergers
Meeting
demands
of a crisis
OECD (2019) Making Decentralisation Work: A Handbook for Policy-makers, OECD Publishing, Paris
The disadvantages: co-ordination can have costs
• Number of municipalities and
ability to coordinate
• Extent of transaction costs
• Appropriate selection of public
service/activity
• National policies that encourage
its development
Disadvantages/challenges Contributors to success
OECD (2019) Making Decentralisation Work: A Handbook for Policy-makers, OECD Publishing, Paris
Expense
Proliferation of cooperative bodies
Governance challenges
Technical/equity challenges
Potentially ambiguous results
Inter-municipal Co-operation Practices in OECD Countries
11
Primary and secondary fields of cooperation among
metropolitan governance bodies in OECD countries
79%
66%
46%
25% 23% 23%14% 13% 13% 9%
13%
18%
39%
21%36%
13% 32%
2%2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Spatialplanning
Transport RegionalDevelopment
Water andSewage
Culture Wastemanagement
Tourism Health careand ageing
care
Environment Social welfareand housing
Primary field of activity Secondary field of activity
Source: (unpublished) OECD Metropolitan Governance Survey 2016 update; published in OECD (2017), Urban Transport Governance and Inclusive Development in Korea, OECD Publishing, Paris.
http://dx.doi.org/10.1787/9789264272637-en
?In Estonia
13
Formats for inter-municipal cooperation
Ela
bo
rate
d fro
m h
ttp
://w
ww
.mu
nic
ipa
l-co
op
era
tio
n.o
rg
Informal
handshake
No judicial
framework
Contract
Private or
public
framework
Institutionalised co-operation
Private law Public law
AssociationCommercial
company
Specialised
legal entity
Territorial
public law
entity
From soft arrangements to more formalised cooperation
Source of revenue depends on status
Australia,
England, Ireland,
New Zealand
Netherlands, Norway, Sweden Belgium,
France,
Netherlands,
Slovak
Republic
France, Italy,
Portugal,
Spain
Inter-municipal co-operation in practice
Objective Country Action/Area/Level of activity
Decentralisation of
tasks
Iceland
The Netherlands
• Social services for disabled
• Social services, employment, social welfare
Basic and non-basic
service delivery
Czech Republic
Finland
Norway
Switzerland
• 790 IMC structures: education, social care, health, culture, environment, tourism
• Health, social care, VET
• Crisis service centres for people subject to violence or threats of violence in close
relationships
• Since 2012 56% of municipalities increased arrangements; almost all cooperate with > 1
peer, in > 1 tasks
Covid-19 Denmark
Italy (Milan)
Latvia
Sweden
Portugal (Lisbon)
• Purchase of PPE (created a collaborative for joint procurement)
• 14 municipalities created info point (portal) for SMEs
• 8 municipalities to share supplies free PPE to seniors
• 4 largest municipalities guarantee a ½ billion line of credit for PPE for all
• 24 boroughs + City acquire basic needs for elderly, chronically ill; phone lines and WhatsApp
connections for in person and psychological support to isolated; marketplace to match skill
demand and supply helping start-ups.
Inter-municipal Co-operation and Estonia
15
Inter-municipal co-operation for Estonia?
• Reducing fragmentation?
• Managing decentralised services and administrative tasks?
• Better service delivery?
• Mitigating the fiscal and investment impact of COVID-19?
• Expense (incentive structures)
• Trust
• Power and resource asymmetries among partnering municipalities
• Data and information to identify actual need and optimal thresholds
• Harmonises service type, quality and availability among municipalities
• Eases delivery of “high-ticket” or very specialised tasks: transport, specialised social services, spatial planning
• Can relieve pressure of under-funded mandates, alternative to “up-scaling” tasks
What is the
objective?
Potential
benefits and
gains
Challenges in
the Estonian
context
Conclusions on inter-municipal co-operation for Estonia
Estonia’s advantages
• Existing legal framework
• Existing experience
• Many options to make it
work
• Room for a voluntary
approach
What Estonia and
Estonians gain
• More effective decentralisation
• Better quality, variety,
accessibility and availability of
services
• Better crisis management and
smoother possible recovery
Who loses?
Who wins?
• Government
• Municipalities
• Citizens
Thank you
Maria-Varinia [email protected]