Policymakers must understand the risks to local governments of sharing the production of services with other governments

In the U.S. and across the world, city governments now face a period of fiscal constraint with declining tax revenues and an increased demand for services. One potential solution to this problem has been for cities to pool resources by introducing shared services agreements. Jered B. Carr takes a close look at such collaborative arrangements, and warns that while they may seem attractive, policy makers need to be aware of the potential risks which can stem from coordination costs, difficulties in dividing benefits, and the potential for one of the parties to not comply with the agreement.