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Too Many Municipalities?

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  • Dahlby, Bev George

Abstract

Does democracy lead to the creation of too many municipalities? We analyze this issue within the context of the Alesina and Spolaore (1997) model where the quality of municipal services deteriorates with the distance from the center of a municipality. Individuals can vote in a referendum to split an existing municipality. We show that social welfare will decline when municipalities are split if the level of the public service, as chosen by the median voter, is lower in the new smaller municipalities. In general, the model indicates that there may be a democratic bias in favour of creating too many municipalities.

Suggested Citation

  • Dahlby, Bev George, 2011. "Too Many Municipalities?," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 65(1), March.
  • Handle: RePEc:fgv:epgrbe:v:65:y:2011:i:1:a:1394
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    References listed on IDEAS

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    1. Alberto Alesina & Enrico Spolaore, 1997. "On the Number and Size of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1027-1056.
    2. Epple, Dennis & Romer, Thomas, 1989. "On the flexibility of municipal boundaries," Journal of Urban Economics, Elsevier, vol. 26(3), pages 307-319, November.
    3. Goyal, Sanjeev & Staal, Klaas, 2004. "The political economy of regionalism," European Economic Review, Elsevier, vol. 48(3), pages 563-593, June.
    4. Anna Bogomolnaia & Michel Breton & Alexei Savvateev & Shlomo Weber, 2008. "Stability of jurisdiction structures under the equal share and median rules," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 34(3), pages 525-543, March.
    5. Patrick Bolton & Gérard Roland, 1997. "The Breakup of Nations: A Political Economy Analysis," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1057-1090.
    6. Haimanko, Ori & Le Breton, Michel & Weber, Shlomo, 2004. "Voluntary formation of communities for the provision of public projects," Journal of Economic Theory, Elsevier, vol. 115(1), pages 1-34, March.
    7. Carey, Malachy & Srinivasan, Ashok & Strauss, Robert P., 1996. "Optimal consolidation of municipalities: An analysis of alternative designs," Socio-Economic Planning Sciences, Elsevier, vol. 30(2), pages 103-119, June.
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    Cited by:

    1. repec:fgv:epgrbe:v:67:n:3:a:4 is not listed on IDEAS
    2. Ponczek, Vladimir & Mattos, Enlison, 2013. "Efeitos da Divisão Municipal na oferta de Bens Públicos e Indicadores Sociais," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 67(3), September.

    More about this item

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism

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