Does shared service delivery affect cost? A study of the cost-capacity relation in Norwegian local child protection services

Intermunicipal cooperation is often seen as a means to increase capacity and reap economic benefits of scale. Prior research, however, shows that the effects of shared service delivery diverge, leaving scholars and practitioners to question whether, under what conditions and at what expense effects of cooperation manifest. Using a panel dataset on child protection services, we analyze how cooperation affects the cost-capacity relation. The results show that cooperation increases cost. This increase is only partly explained by investments in service capacity, indicating that there are significant transaction costs linked to cooperation as a mode of production.