An International Perspective on the Determinants of Local Government Fragmentation

Subnational government fragmentation, associated with the small size of jurisdictions to take advantage of economies of scale in service delivery, is a commonly perceived problem in many decentralized systems around the globe. In this paper we use a large cross-section of countries to analyze the determinants of jurisdictional fragmentation along two dimensions: the number of tiers of government and the number and average size of all subnational government units. The main questions addressed in this paper are the identification of the main determinants of jurisdictional fragmentation as presently observed across countries and how well those findings line up with the predictions of the expanded standard model of optimal jurisdiction size. To our knowledge, to date, there does not exit a rigorous study analyzing the cross-country determinants of fragmentation in the way this issue has been previously analyzed for some particular countries. In our empirical analysis we find that the vertical structure of government—the number of tiers of government—is mostly related to “size” variables and not to other institutional or preference-related aspects. One main additional finding from our analysis is that, in line with the predictions of our theoretical framework, preferences for political accountability lead to smaller jurisdictional size and a larger number of governments. We also find strong evidence that a higher number of tiers of government leads to overall higher jurisdictional fragmentation.