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Jurisdiction Size and Local Government Policy Expenditure: Assessing the Effect of Municipal Amalgamation

  • JENS BLOM-HANSEN (a1), KURT HOULBERG (a2), SØREN SERRITZLEW (a1) and DANIEL TREISMAN (a3)
Abstract

Across the developed world, the last 50 years have seen a dramatic wave of municipal mergers, often motivated by a quest for economies of scale. Re-examining the theoretical arguments invoked to justify these reforms, we find that, in fact, there is no compelling reason to expect them to yield net gains. Potential savings in, for example, administrative costs are likely to be offset by opposite effects for other domains. Past attempts at empirical assessment have been bedeviled by endogeneity—which municipalities amalgamate is typically nonrandom—creating a danger of bias. We exploit the particular characteristics of a recent Danish reform to provide more credible difference-in-differences estimates of the effect of mergers. The result turns out to be null: cost savings in some areas were offset by deterioration in others, while for most public services jurisdiction size did not matter at all. Given significant transition costs, the finding raises questions about the rationale behind a global movement that has already restructured local government on almost all continents.

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Corresponding author
Jens Blom-Hansen is Professor, Department of Political Science, Aarhus University, Bartholins Alle 7, 8000 Aarhus C, Denmark (jbh@ps.au.dk).
Kurt Houlberg is Director of Research, KORA, Danish Institute for Local and Regional Government Research, Købmagergade 22, 1150 Copenhagen K, Denmark (kuho@kora.dk).
Søren Serritzlew is Professor, Department of Political Science, Aarhus University, Bartholins Alle 7, 8000 Aarhus C, Denmark (soren@ps.au.dk).
Daniel Treisman is Professor, Department of Political Science, University of California, 4289 Bunche Hall, Los Angeles, CA 90095-1472, USA (treisman@polisci.ucla.edu).
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