A Compendium of Collaborative Arrangements in Metropolitan Areas
Developed by: The World Bank’s China Urban and Disaster Risk Management Team
Main Author: Mats Andersson
Under Guidance: Francis Ghesquiere
Team Members: Yuan Xiao, Barjor Mehta, Wanli Fang and Xiao Wu
Photos on the cover page: Barjor Mehta

Background
As the world is becoming increasingly urban, it is also becoming increasingly metropolitan. Cities have expanded outwards, and satellite cities and towns have over time become more closely connected to an urban center. Urban development changes an area, but administrative boundaries tend to be quite stable. Many cities have become more economically interdependent with their neighboring cities (and peri-urban and rural areas), constituting a single economy and labor market (a
functional economic area), usually including various local government jurisdictions – defined here as a metropolitan (metro) area or city-region. Such an area is usually (but not always) within one regional/provincial/ state jurisdiction.
Inadequate metropolitan arrangements can be costly. Lack of dialogue and coordination among the local governments in a metro area can have many negative consequences and miss opportunities. For example:

• Fragmentation of some public services (particularly those of common interest like public 
  transport) which results in higher costs and financing challenges for each local government. Inefficiencies due to a lack of broad-based planning can also fester in such sectors as solid waste disposal and flood management,
• Negative spillovers. Air pollution, flooding, and crime do not respect jurisdictional borders,
• Free ridership. For example, the core city may need to address such problems such as congestion from its own resources without fair contribution from the neighboring jurisdictions, who benefit from the positive effects of the agglomeration,
• Underutilization of some land which may have limited value locally but potentially carry a
  higher value from a regional perspective, and 
• Disparity between parts of the metro area, e.g., differences in the local financial capacities,
  creating large differences in the quality of amenities and services.

Fragmentation can impede productivity and economic growth. A study of five OECD countries (Germany, Mexico, Spain, the United Kingdom, and the United States) found that cities with a fragmented governance structure (measured by the number of municipalities in the metropolitan area) tend to have lower levels of productivity. An area with a similar population size, but twice the number of municipalities, was associated with six percent (6%) lower productivity. Possible reasons for this
are that fragmentation can negatively impact transportation investment and land use planning, increasing congestion and reducing a city’s overall attractiveness. Fragmentation can also impede growth because firms may have to face overlapping business and environmental regulations, increasing the cost of doing business. According to the study, the impact of fragmentation on productivity is only about half (3%) when there is a metropolitan governance body.

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