Borrowing Size and Functions From Nearby Cities: The Mediating Role of Inter‐Municipal Cooperation

ABSTRACT This paper first analyzes whether the efficiency of smaller municipalities is associated with the agglomeration advantages of their larger neighbors through “borrowed size” and “borrowed functions” mechanisms. Second, it explores the role of inter‐municipal cooperation (IMC) in these mechanisms. Based on a data set of 29,873 French municipalities over the period 2016–2018, we use stochastic frontier analysis to estimate a measure of municipal spending efficiency and investigate how it is affected by borrowing size/functions. Our findings show that smaller municipalities are associated with efficiency gains from the agglomeration perks of their neighbors, regardless of the IMC, as expected. However, larger municipalities within an IMC group are those most strongly associated with borrowing functions from their smaller neighbors, casting a shadow over their performance.