Common Contracts
1 similar Inter-Municipal Cooperation Agreement contracts
Inter-municipal cooperation between rent-seeking administrators in the presence of fiscal and institutional disparitiesInter-Municipal Cooperation Agreement • June 12th, 2022
Asymmetric fiscal needs of municipalities bias yardstick competition between pure rent- seeking local administrators. There are cases where differences in institutional quality may mitigate this bias, in other cases the bias is exacerbated. While incumbents gain control over the political yardstick competition by cooperating in inter-municipal consortia, they increase the extracted rent lowering the quality of public services. The yardstick competition bias leads to asymmetric rent share that makes possible inter-municipal cooperation only if the institutional quality of the municipal consortia is low enough, depending on the minimum service quality set by the central government, and the average institutional quality of the single municipalities. Matching grants from upper levels of government or economies of scale may be incentives to cooperation since they reduce the cost of local public goods supply increasing the amount of total cooperative rent. However, they fail to increase the
