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Do merging local governments free ride on their counterparts when facing boundary reform?

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  • Tyrefors Hinnerich, Björn

Abstract

The Western world exhibited a significant trend towards larger local governments in the twentieth century, which was driven to a large extent by boundary reforms. Boundary reforms can provide economic benefits, but may also give rise to costs driven by opportunistic political behavior. This study uses a Swedish compulsory reform to test for such behavior. The reform gives a local government the incentive to accumulate debt before a merger takes place, since the taxpayers in the new locality will share the cost. The strength of the incentive to free ride is determined by the population size of the initial locality relative to that of the new locality. I find an economically large and statistically significant free riding effect.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 93 (2009)
Issue (Month): 5-6 (June)
Pages: 721-728

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Handle: RePEc:eee:pubeco:v:93:y:2009:i:5-6:p:721-728

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Web page: http://www.elsevier.com/locate/inca/505578

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Keywords: Amalgamations Annexations Boundary reforms Common pool Difference-in-difference Fiscal policy Free riding Local governments;

References

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Citations

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Cited by:
  1. Katsuyoshi Nakazawa, 2013. "Amalgamation, free-ride behavior, and regulation," MAGKS Papers on Economics 201339, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  2. Jordahl, Henrik & Liang, Che-Yuan, 2006. "Merged Municipalities, Higher Debt: On Free-riding and the Common Pool Problem in Politics," Working Paper Series 679, Research Institute of Industrial Economics.
  3. Katsuyoshi Nakazawa, 2013. "Municipality amalgamation and free-ride behavior: Eligibility assessments for long-term care insurance in Japan," MAGKS Papers on Economics 201340, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  4. Katsuyoshi Nakazawa & Tomohisa Miyashita, 2013. "Municipality amalgamation in Japan: A survival analysis of the timings of the amalgamation process," MAGKS Papers on Economics 201338, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  5. Miyazaki, Takeshi, 2013. "Municipal Consolidation and Local Government Behavior: Evidence from Japanese Voting Data on Merger Referenda," Discussion Paper Series 588, Institute of Economic Research, Hitotsubashi University.
  6. Libman, A., 2011. "Integration of the Regions: Economic and Economic-Political Effects," Journal of the New Economic Association, New Economic Association, issue 10, pages 155-158.
  7. Katsuyoshi Nakazawa & Tomohisa Miyashita, 2013. "Does the method adopted for distribution of services by amalgamating municipalities affect expenditure after amalgamation? Evidence from Japan," MAGKS Papers on Economics 201315, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  8. Reingewertz, Yaniv, 2012. "Do municipal amalgamations work? Evidence from municipalities in Israel," Journal of Urban Economics, Elsevier, vol. 72(2), pages 240-251.
  9. Sune Welling Hansen, 2014. "Common pool size and project size: an empirical test on expenditures using Danish municipal mergers," Public Choice, Springer, vol. 159(1), pages 3-21, April.
  10. Hirota, Haruaki & Yunoue, Hideo, 2011. "Municipal mergers and special provisions of local council members in Japan," MPRA Paper 37485, University Library of Munich, Germany.
  11. Blesse, Sebastian & Baskaran, Thushyanthan, 2013. "Do municipal mergers result in scale economies? Evidence from a German federal state," Center for European, Governance and Economic Development Research Discussion Papers 176, University of Goettingen, Department of Economics.
  12. Aggeborn, Linuz, 2013. "Voter Turnout and the Size of Government," Working Paper Series, Center for Fiscal Studies 2013:14, Uppsala University, Department of Economics.
  13. Janne Tukiainen & Tuukka Saarimaa, 2013. "Common Pool Problems in Voluntary Municipal Mergers," Working Papers 53, Government Institute for Economic Research Finland (VATT).
  14. Aggeborn, Linuz, 2013. "Voter Turnout and the Size of Government," Working Paper Series 2013:20, Uppsala University, Department of Economics.

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