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Do municipal mergers result in scale economies? Evidence from a German federal state

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  • Blesse, Sebastian
  • Baskaran, Thushyanthan

Abstract

The extant empirical evidence on the fiscal consequences of municipal mergers is ambiguous. We therefore revisit this question by making use of a merger reform in the German federal state of Brandenburg in 2003. In addition to identifying the causal effects of mergers on municipal expenditures by relying on a natural experiment, one novel contribution of our study is to explore the fiscal consequences of both compulsory and voluntary municipal mergers within the same institutional setting. Using a difference-in-difference design with municipality-level panel data (aggregated to post-reform territorial boundaries), we find substantial and immediate reductions in total, administrative and current expenditures per capita after compulsory mergers. Voluntary mergers, on the other hand, have smaller and less robust effects. --

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Bibliographic Info

Paper provided by University of Goettingen, Department of Economics in its series Center for European, Governance and Economic Development Research Discussion Papers with number 176.

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Date of creation: 2013
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Handle: RePEc:zbw:cegedp:176

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Keywords: municipal mergers; economies of scale; voluntary and compulsory mergers;

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  1. Reingewertz, Yaniv, 2012. "Do municipal amalgamations work? Evidence from municipalities in Israel," Journal of Urban Economics, Elsevier, vol. 72(2), pages 240-251.
  2. 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.
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  4. Buettner, Thiess & Holm-Hadulla, Fédéric, 2013. "City size and the demand for local public goods," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 16-21.
  5. Dollery, Brian E & Worthington, Andrew C, 1996. " The Empirical Analysis of Fiscal Illusion," Journal of Economic Surveys, Wiley Blackwell, vol. 10(3), pages 261-97, September.
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  7. Jordahl, Henrik & Liang, Che-Yuan, 2006. "Merged Municipalities, Higher Debt: On Free-riding and the Common Pool Problem in Politics," Working Paper Series, Uppsala University, Department of Economics 2006:27, Uppsala University, Department of Economics.
  8. Timothy Besley & Anne Case, 1994. "Unnatural Experiments? Estimating the Incidence of Endogenous Policies," NBER Working Papers 4956, National Bureau of Economic Research, Inc.
  9. Hans Pitlik & Klaus Wirth, 2012. "Municipal Structural Reform and Inter-municipal Cooperation," WIFO Monatsberichte (monthly reports), WIFO, vol. 85(12), pages 957-967, December.
  10. Shahidur R. Khandker & Gayatri B. Koolwal & Hussain A. Samad, 2010. "Handbook on Impact Evaluation : Quantitative Methods and Practices," World Bank Publications, The World Bank, number 2693.
  11. Tyrefors Hinnerich, Björn, 2009. "Do merging local governments free ride on their counterparts when facing boundary reform?," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 721-728, June.
  12. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 64, pages 416.
  13. Kauder, Björn, 2011. "Institutions and Public Sector Performance: Empirical Analyses of Revenue Forecasting and Spatial Administrative Structures," Munich Dissertations in Economics 13683, University of Munich, Department of Economics.
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