Does cooperation pay off over time? Evidence from water and wastewater services

Local governments around the world adopt governance arrangements, including intermunicipal cooperation (IMC), as strategies to improve water and wastewater services (WWS). This study examines whether involvement in IMC is associated with improved performance of WWS providers. Performance in financial outcomes, water coverage, wastewater coverage, and service quality is considered. The empirical analysis employs panel data regression models, using fixed-effects specifications as the baseline and random-effects and correlated random-effects models as robustness checks. The sample comprises Brazilian municipalities that directly provide WWS, whether or not they participate in IMC arrangements. he results indicate mixed effects, with a key contribution of the study being the explicit distinction between participation in cooperation and its duration. Although participation in IMC per se is not associated with improvements in financial outcomes or service coverage, longer durations of cooperation are positively associated with these dimensions. By contrast, participation in IMC is positively associated with service quality, measured by water losses, whereas longer durations of cooperation are linked to a deterioration in this dimension. These findings suggest that organisational learning and the maturation of governance arrangements play an important role in shaping performance outcomes over time, while also revealing a trade-off between performance – particularly financial outcomes and coverage – and service quality. The study underscores that IMC is not a policy panacea: its effectiveness depends not only on adoption but also on the sustainability of cooperation and on the capacity to balance the expansion-quality trade-off inherent in WWS provision, particularly in developing-country contexts.