Analysis Related to Optimal Size of Municipality and Efficiency - A Literature Review

The need for policy with a territorial focus is prompting central governments in most of European Countries in transition. They pay attention to sub-national territorial levels. In all territorial development studies and assessments conducted at sub-national level, the choice of territorial unit is of prime importance. The reference used by international bodies, researchers and policy-makers in their work is usually a country’s administrative units, given the availability of relevant information. The purpose of the Literature Review is to clarify some questions: Is there an optimal size or range of sizes for a local government entity from the standpoint of efficiency and to minimize duplication of efforts? Are there diseconomies of scale associated with larger local governments requiring proportionally more administration? There is a healthy literature on municipal size and the efficiency of the delivery of municipal services. The belief that larger size local governments would be more efficient has motivated much of this work and, further, has motivated the call for consolidation to cure the supposed inefficiencies.