For local governments, inter-municipal cooperation (IMC) has become an increasingly common solution to tackle fiscal constraints and demographic challenges. However, in many policy areas, it is still not clear whether IMC fulfills its promises of cost savings or increased service quality. This study aims to contribute new knowledge on the effects of IMC in one of these understudied policy areas - education - and does so by employing recent developments in difference-in-differences methods. The results show that being part of IMC significantly reduces expenditures on upper secondary education. However, there are indications that decreased costs come at a price, since joining a local federation also correlates with lower grades in the cooperating municipalities. Because of the potential drawback associated with local federations - lower grades - policymakers should be cautious of creating IMC in upper secondary education. More research is needed on the relationship between IMC and service quality in this area.