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In order to provide local public goods, municipalities can cooperate and exploit economiesof scale and scope. We present an analytical model of the costs and benefits of two such forms of cooperation:Consortia and Unions. We find that the efficiency of these two forms of cooperation depends onthe number of participants, the transaction costs, and most importantly the type of local public good. Inparticular, the elasticity of substitution among the services pertaining to a particular public good plays adecisive role. For services with a high elasticity of substitution the Union performs better than the Consortium,and vice versa. This provides a guidance for the decision on which institution provides whatpublic good.

The literature on collusive cartels has mainly focused on the impact of antitrust fines on the sustainability of cartels, in infinitely repeated games. This approach, however, does not allow us to study the effect of antitrust fines on the incentives to form cartels in the first place. In this paper, we adopt a coalitional game approach to modeling collusive agreements, showing that antitrust fines may drive firms from partial cartels to a monopolistic cartel. Moreover, by introducing uncertainty on market demand, we show that the socially optimal competition policy can call for a finite or even zero antitrust penalty, even if there are no enforcement costs. We provide a sufficient condition for these results to apply to any coalitional game of cartel formation with symmetric firms. Then, we discuss the extension to asymmetric firms and dynamic collusion.

The present work looks at the relationship between institutional structure and economic performance at the regional level. The work focuses on one particular aspect, the number of municipalities in a given region (municipal fragmentation) and the impact on regional development measured as GDP per capita growth. The impact of municipal fragmentation on regional development is not clear a priori. The theory of fiscal decentralisation maintains that institutions closer to citizens can better deal with their needs, thus providing services and public goods in a more efficient way. This closeness, however, implies the presence of many local governments (e.g., municipalities), which may create problems in terms of policy spillovers and (dis)economies of scale. The present work tests the impact of municipal fragmentation on a sample of OECD TL2 regions, in the period 1996-2011. The analysis shows that the impact of fragmentation on regional performance depends on regional territorial characteristics. In particular, the negative impact of fragmentation increases with the share of regional population living in urban areas. In fact, for ?rural? regions the effect is small or even positive where a high share of the population lives in rural areas. This is because the costs and benefits of decentralisation have a different impact in urban and rural regions. In urban regions, the benefit of internalising policy spillovers (and reducing transaction costs) is higher than the loss of proximity, because population is geographically concentrated and commutes more than population in rural areas, where policy spillovers are smaller and the costs associated with the loss of proximity higher. The implications for countries? economic policies are threefold. Firstly, countries should not consider the degree of administrative fragmentation per se, it is important to weight it for the rural index at the regional level. For instance, when considering France as a whole the level of municipal fragmentation is the second highest among OECD countries, but most of this fragmentation stems from rural regions. Secondly, the analysis implicitly recognises the importance of dealing with governance gaps in urban regions; for instance, the lack of co-operation in transport policies is especially detrimental for the performance of metropolitan areas. Thirdly, the overall effect of a reduction of municipal fragmentation would depend on the types of regions within each country. To sum-up, the present work shows the importance of territorial characteristics for administrative performance, thus advocating for a place-based approach to institutional reforms.

This paper conducts an empirical analysis of the determinants of airline alliances. Well established airlines with large passengers' volumes are more likely to participate in an alliance and are also essential for alliance survivability. In line with this finding, older air-lines have a higher probability of being part of an alliance. Airlines operating with high load factors consider alliance participation as a significant alternative to fleet capacity expansion. As their market share grows, alliances become more appealing to airlines. Competitors' decision to enter an alliance tends to have a positive impact on alliance participation. The relatively similar magnitude and effect of the regressors' coefficients across different alliance choices, suggests that the airline's major decision is not to choose a specific alliance, but rather considering whether to enter into an alliance, as a possible strategy within its business model.

Previous studies on electoral competition show that fiscal variables are manipulated by incumbent politicians in order to be re-elected. This phenomenon has been addressed by the literature on electoral budget cycle and, in a decentralised economy, by the literature on yardstick competition. Our objective is to consider the effect of the introduction of a fiscal rule on the opportunistic behaviour of incumbent politicians. We conduct a panel data analysis on the current expenditures of 246 Italian municipalities. The introduction of the domestic stability pact (DSP) seems to change the electoral cycle, by increasing the magnitude of the expenditures during pre-electoral periods. Moreover, our results show that municipalities affected by the DSP are more sensitive to changes in neighbouring jurisdictions' fiscal policies, during pre-electoral periods. We conclude that the introduction of the DSP, besides significantly reducing the level of local public spending, strengthens the opportunistic behaviour of incumbent politicians in pre-electoral years.