Decentralization, administrative reforms and local government performance: The impact of inter-communality in a pre-crisis time

Abstract

This paper attempts to evaluate if local council partnerships are effective in the decentralization design accordingly to the suggestions put forward by the literature on functional, overlapping and competing jurisdictions (FOCJ). The issue is empirically addressed by evaluating the effect of local partnerships on two local council performance indicators, namely revenue autonomy and expenditure. Heterogeneity responses are also examined by considering differences in the partnerships according to their institutional nature, i.e. mandatory versus voluntary partnerships. The case study consists of the whole set of 246
municipalities belonging to the Marche Italian region and estimation is carried out with reference to the years 1999 and 2003. Results show the degree of autonomy assigned to local councils to choose partners for cooperation is a crucial element of an effective local government reform. While mandatory local council partnerships show to be not effective to improve local council performance, voluntary local council partnerships enhance revenue autonomy without affecting local council expenditure. Thus, inter-communality projects that fit the theoretical prerequisite of FOCJ, as it is the case of voluntary local council partnerships, can help to improve horizontal decentralization.